- Zamara Group, has entered into a Memorandum of Understanding with the Kenya National Federation of Jua Kali Associations
- The deal is aimed at driving financial inclusion to the informal sector to enable saving, protection from old age poverty and pertinent risks that come along with the life cycle of the average Jua Kali worker
- The two parties have come to an agreement seeking for ways to continue with the existing framework aimed at the protection of the sector’s members
Financial services provider Zamara Group has entered into a Memorandum of Understanding with the Kenya National Federation of Jua Kali Associations (KNFJKA) aimed at driving financial inclusion to the informal sector to enable saving, protection from old age poverty and pertinent risks that come along with the life cycle of the average Jua Kali worker.
The two parties have come to an agreement seeking ways to continue with the existing framework aimed at the protection of the sector’s members.
The first initiative within the partnership is the rollout of Zamara’s Savings and retirement product, Fahari Retirement Product to over 18 million members across the country.
The Fahari Retirement Plan is an innovative individual retirement solution targeted to the individuals within the productive age of the population to save for their future. The majority of whom are active in the informal sector.
Speaking during the signing Zamara Group Chief Executive Officer said, “We recognize that in the current environment we live in, the best way to have an adequate income for the future when you are not agile to work anymore is to gradually save as much as you can while you are still strong enough to work.
“Pension schemes, especially individual pension schemes like Fahari, are fundamental in the journey towards financial security. Roughly speaking, if two individuals aged 20 and 30 start saving Sh500 every month up to age 55, their savings earn 10% per year compounded every year month. The 20-year-old would have around Sh 2.7 million at age 55, while the 30-year-old would have around Sh 1.08 million at age 55. This means that the value of an individual’s savings depends on their contribution level and how early you start saving for your future,” Raichura added.
On his part, Richard Muteti, Chief Executive Officer, Kenya National Federation of Jua Kali Associations said, “We are grateful to Zamara for identifying this gap and initiating the process to accord the sector a solution that will offer our members a dignified future, especially when they are no longer strong and agile enough to continue with their work for the much-needed income. The savings solution we are launching today is a game-changer and will be a great determinant of how you finish your financial journey”
Financial Inclusion in the country has been limited to a small segment of the population within the formal sector and the penetration within the informal sector has perennially been low due to the lack of communication that speaks to the specific needs of the sector.
“The Jua Kali sector is largely seen as an informal sector in Kenya whose importance to the economic development of the country cannot be underestimated. The sector represents an integral part of the economy and indeed of the labour market. In many countries, our sector plays a significant role in employment creation, production, and income generation. In Kenya, we, the Juakali sector represents 83% of employment opportunities,” Muteti added.
“I believe that this is the first of many partnerships. Through this, we will grow together by providing pensions solutions and progress this to other spaces to also meet your insurance needs,” Raichura said.
This comes at a time when Pension Fund Trustees and administrators have been urged to show greater accountability to members by ensuring they have access to the right messages.
Raichura recently said that adequate member communication were the greatest failures within the pension schemes.
“Many trustees of pension funds presume that the two key points when communication is relevant is on joining and on leaving. In reality, individuals need information and counselling throughout their journey as pension fund members.”
Raichura noted that to effectively address the savings and retirement issues of Kenyans there was need to focus on the entire financial journey and the holistic need of individuals while they make that journey. Giving individuals regular information about their pension savings and whether they were on course for an adequate benefit on retirement or exit would ensure members of pension funds were more connected with their retirement saving.
Raichura also urged the Government to seriously reconsider the current tax deductible limit on pension contributions of only KSh 20,000 a month and have this substantially increased given that it had not been increased for almost 20 years.
“If we are serious about increasing long term saving in our country, the Government does need to provide the right incentives for such savings. Currently the tax system is stacked against pensions savings and individuals hence choose other investments such as unit trusts to pension savings” added Raichura.