Saving for retirement in the informal sector: A market vendor’s story

March 8, 2018

Ruth Kamu                                    PC: Hilary Vanderwey

Since June last year, Ruth Kamu has stuck to her goal to save at least SBD $100 (USD $12.79) a month toward her retirement.  The 43-year-old market vendor in Honiara, Solomon Islands, says that she plans to build a home that she can live out her twilight years in.

Ruth has been selling peanuts from her stall at the market for the past 20 years and earns about SBD $5,400 (USD $692.23) a week.  After her weekly expenses, she tries to deposit money into her pension account, two to three times a month.

She was one of the first people in Honiara to start a savings account with the Solomon Islands National Provident Fund’s (NPF) Voluntary Pension scheme called ‘youSave’.

“When the Market Vendors Association announced that the NPF would be coming to the market to sign up customers, I jumped at the opportunity to save with an institution I trust.  In the past, I had tried to open a bank account to save my earnings but was discouraged because I did not meet the ‘Know Your Customer’ identification requirements,” she said.

She explains that previously, she hid her money at her stall in the market where she became a victim of theft.

“I am grateful to have a safe place to save my earnings and I am very happy that there are no account fees and that my money is earning interest,” she said.

For economically active Solomon Islanders in the informal sector like Ruth, a secured retirement hasn’t been something that they could aspire to given that only formally employed workers were previously contributing to the superannuation fund.

In May 2017, through Australian Government funding, the Pacific Financial Inclusion Programme (PFIP) assisted the NPF with the roll out of a prototype micropension product targeting the informal sector. This sector makes up about 80 percent of the country’s population of over 600,000 people (based on 2016 census).

Unlike the traditional NPF mandatory account where employers make contributions, anyone can become a member of the micropension product, ‘youSave,’. youSave includes two accounts where every dollar saved is split equally into these accounts.   The Preserved account cannot be touched by the account holder until the age of retirement while the General account allows the client to withdraw funds during emergencies up to four times a year.

Though a voluntary superannuation account has always been in existence, there was very little awareness of the account and only about 460 people were registered, some of which were not actively contributing because of difficulties in accessing an NPF branch.

In preparation for the roll out of the prototype product, PFIP conducted field research to determine the needs of the target group. The research evaluated the demand for pension, informing the design of product features and benefits, communication strategies and the overall operational framework of the pension scheme.

The research uncovered a widespread awareness of not being properly prepared for later life, with the majority of focus group participants prepared to participate in a micropension scheme. The research also found that over 70% of respondents expected to receive financial support from their families in old age, with only about 12% stating they believed they could survive off their own savings.

The first clients to sign up for the new account were women market vendors who previously had bank accounts, but closed them because of the constant bank fees they would incur.  Many of them resorted to stashing their earnings under crates at their stalls or under their mattresses at home, prone to theft and unplanned spending. 

Using an Innovation Lab model employing Human Centred Design, PFIP worked with the NPF and ANZ Bank to develop a prototype to test client response to mobile payment interfaces (such as mobile apps) and other methods for making NPF contributions, distribution, marketing messages and mediums and how to create awareness raising around the need to save for old age.

In the first phase, the NPF visited markets around the country, setting up a booth once a week to sign up market vendors.  The team also traveled to many remote areas where NPF offices, banks, and ATMs are nonexistent.  This mode would prove too expensive in the long run so a digital channel was tested through ANZ bank’s goMoney mobile banking platform.  An agent/merchant network (community stores) was also set up to use the platform to receive contributions.

Speaking about the convenience of a digital payments system, President of the Market Vendors Association, Moreen Sariki, said that her members were grateful for the goMoney option because they did not have the time to line up at the NPF office to deposit their savings.

“People’s attitudes to saving is changing and giving them the option to make small deposits from the comfort of their home or stall means that they can continue to earn a living without having to worry about the time and money they would lose if they were manually making payments,” said Sariki.

By December 2017, the project proved that there was a clear demand for a pension product with over 1,200 Solomon Islanders signing up to the product (700 customers more than initially expected in the testing phase).  The NPF noted that 2,500 deposits were made over the six-month recruitment period and averaged SBD $169(USD $21.62) per deposit, also proving usage. 

More than 50% of the account holders had deposited at least once with the most frequent depositor crediting the account 15 times.  Women made up 57% of the customers and notably, one woman deposited SBD $50,000 (USD $6,396.50) on her second transaction.

NPF plans to scale up the product in mid-2018.  A similar project is currently being tested in Fiji.  Results from both countries could help form the future of micropensions in other Pacific Island nations.