The Linkage between Social Security and Informal Economy
The Development Institute at the University of Nairobi is collaborating with Mzumbe University and Roskilde University to conduct a research on social security and informal economy in Kenya and Tanzania.
This is a huge project which will involve numerous researchers spanning the three universities. Today, I attended the launch of the research project at Nairobi Safari Club and I was impressed with what I leant from the discussions on social protection.
The Principal for School of Humanities officially open the meeting and provided deep insights on social protection. He particularly referred to social protection as social capital. The good professor pointed out on the need for linkages between academia and industry.
The research focuses on transport, petty trade and construction. These are the areas which have large numbers of informal traders.
Social protection consists of:
- Social Insurance
- Social Transfers and
- Minimum labor standards
The service providers (National Health Insurance Fund, National Social Security Fund, Retirement Benefits Authority) made their presentations providing crucial data on the state of social security in Kenya. The social security secretariat pointed out that the 320,000 households have so far benefited from Cash Transfers.
The government is currently working on rolling out the Universal Cash Transfer for people over 70 years.
In all groups the government has transferred cash to over 800,000 beneficiaries countrywide. The Hunger Safety Net Programme has been focusing on Marsabit, Turkana, Wajir and Mandera.
All service providers agreed with the researchers that social protection is very dynamic. This problem is compounded by the fact that there is no legal framework for social protection in Kenya.
The actors in the sector are happy that Kenya is working on an investment plan for social protection. In order to strengthen the sector, the relevant departments and agencies should work together in developing a Monitoring and Evaluation framework to document the progress made so far and future plans.
Informal Economy
According to a research by International Labor Organization (ILO) 8 out of every 10 new jobs in Africa, are in the informal sector.
The NHIF charges Ksh. 500 for members working in the informal sector. They pay through NHIF agents and online. The agency reported further that out of the 1.6 million members registered 35% are from the informal sector. The agency is facing a number of challenges and success with this group. These are as follows:
- Low retention rate (36%) compared to 86% in the formal sector
- There is a lot of adverse selection. This is a situation where members from the informal sector remember NHIF when they are sick.
- The NHIF has widened the scope of services provided to include outpatients, renal analysis, and rehabilitation for drug addicts, surgical procedures and overseas treatment.
National Social Security Fund (NSSF)
The NSSF was founded by an Act of Parliament in 1965. This act was reviewed in 2013 to allow NSSF to create a Pension and Provident Fund.
It’s interesting to learn that at the beginning NSSF covered men only. It was a men-only affair until 1977 when women were allowed to join the Fund. Tumetoka mbali!
As stated above NSSF has two types of funds:
- A Pension Fund- This is a mandatory Scheme for all formal workers
- A Provident Fund
Challenges Faced by NSSF
- Deepening poverty
- Uncertainties and seasonality
- Low income
- Insufficient data on informal labor
- Immediate and futuristic concerns
- Inadequate proper awareness
World Bank Group
The World Bank was represented at the workshop. The representation pointed out that WB is also doing some work in promoting social protection in Kenya and elsewhere. This is done through social safeguard measures.
The Safeguards Environmental Impact Assessment is a compulsory requirement before WBG lends its money to governments around the world.
Vision 2030 Blueprint
The representatives from the Vision 2030 secretariat pointed out that social security is a key component of the social pillar on the economic blue print. The director further pointed out that social security has come a long way since 2005 when it was first launched at that time serving just 500 households in 3 districts. Now we are talking of nearly 1 million people around the country.
