The Rwandan government is pushing for a comprehensive provident fund that will cater for people working in the informal sector.
Parliament is considering a Bill that seeks to institute a long-term savings scheme, which, according to the Ministry of Finance and Economic Planning (MINECOFIN) could be up and running by next year if approved.
“We have an aging population and this creates a public policy challenge for the government,” Minister Claver Gatete told parliament.
Data from the National Institute of Statistics of Rwanda, show that despite the country being relatively young, the number of those above 15 years of age are projected to double to approximately 1,096,000 million people by 2032 from roughly 510,000 people in 2012.
Reduced fertility rate
With the trend showing a sharp reduction of fertility rates and an increase in life expectancy, the Speaker of Parliament, Donatille Mukabalisa, fears that without a long-term saving scheme, many Rwandans would become a burden for the country in the future.
Currently, only 10 per cent of the country’s total workforce are salary earners and have a pension scheme under the Rwanda Social Security Board (RSSB).
According to Minister Gatete, the aging population lacks supplementary scheme to cater for other needs like buying a house or paying for education in order to guarantee a decent retirement.
An explanatory note of the scheme reads, "Those excluded from the RSSB pension scheme who represent 90 per cent of the workforce are neither covered by a pension scheme nor a long-term savings scheme and this has negatively affected the national savings rates required to increase private sector investment and reach double-digit GDP growth."
The proposed voluntary saving scheme is anticipated to attract public sector salaried employees, private sector salaried and self-employed business owners, people involved in the informal sector as well as children below the age of 16 years who will access the scheme through a sub-account opened by their parent or guardian.
However, analysts fear it will face challenges of lack of liquidity among a majority of the population.
According to Eric Rwigamba, the director-general of the Financial Sector development in MINECOFIN, the scheme would accommodate people who do not have stable earnings by enabling them to pay their contributions in installments as it will be up to contributors to decide how much they want to save and how often they want to do this.
The official also said that to ensure mass participation, the government would give incentives to low-income earners by co-contributing based on their income and their savings.
“Subscribers will also be allowed to use part of their accumulated savings as collateral to get a loan for a house or for funding higher education,” added Mr Rwigamba.
Analysts say the success of the scheme lies in its management and allude to the recurring financial mismanagement in RSSB and risky investment strategies condemned by the Auditor-General in Mr Rwigamba's yearly reports.