MOBIKEZA by Octagon Africa: A Timely Plan to Help Kenyans Save For Retirement

Destin Africa
Godwin Simba, Managing Director, Octagon Pension Services Limited.

The unique pension plan allows Kenyans to save any amount they are comfortable with to secure their future

Like in many African countries, pension coverage is low in Kenya mainly due to a relatively small size of the formal economy, general lack of awareness about pensions, lack of flexible pension arrangements and the low disposable income of many Kenyans.

Statistics from the pension industry regulator Retirement Benefits Authority (RBA) show that only 20 percent of Kenya’s labour force is under formal pension plans.

The situation is grave in the informal sector, which constitutes of 80 percent of Kenya’s workforce. Just a negligible percentage has subscribed to pension plans.

This makes poverty in the old age a reality and if the uptake does not go up, the working population in future will have the unenviable task of supporting both the retirees and the generation which has not attained employability age.

Despite the scary statistics, Kenya’s pension industry has made major strides in automating processes hence the observable efficiency in service delivery.

This has primarily been necessitated by the innovative pension products that have been designed by pension solution providers as they seek to take advantage of the rising opportunities in the industry.In an effort to enhance the savings culture in the country, pension providers have been on an overdrive to roll out retirement plans that seek to tap into the unexplored market.

One such product is MOBIKEZA, a flexible and effective micro-pension solution that was introduced into the market by Octagon Africa in August 2019. “It is the first of its kind, a fast and convenient way for Kenyans to save for retirement,” says Godwin Simba, Managing Director at Octagon Pension Services Limited.

“We designed the plan to provide our members with a retirement savings solution that is easy to understand and flexible as we seek to improve the uptake level of pension among Kenyans.”

“We place great value in providing unique solutions to our clients and this is the reason why we have invested time and resources to develop an approach that delivers to our clients,” he adds.

Under the package, low income earners, especially those in the informal sector can now save as little as one shilling daily towards their retirement.

Mr Simba notes that this group of people has for a long time been neglected by the formal pension industry and is ultimately condemned to poverty in old age. But with MOBIKEZA, an innovative individual pension plan, informal sector workers including craftsmen, mechanics, mama mbogas, farmers, entrepreneurs or even individuals seeking to increase their retirement savings among others can now save for their retirement with ease.

MOBIKEZA is a hassle free retirement savings plan that makes use of a mobile based platform. Customers can dial the USSD code *237# and save within two minutes. For those with smartphones, they can download the MOBIKEZA app from the Google store.

The mobile phone penetration rate in Kenya stands at 84 percent meaning that Octagon’s innovation is strategically placed to meet the needs of a majority of economically active Kenyans both in the formal and informal sectors. In this age where technology is a key ingredient of business growth, solutions that are aligned to mobile technology are a driving force in bringing the services closer to the customers.

With the launch of MOBIKEZA, Mr Simba believes that there is a possibility to increase pension coverage in the market and at least get to the standard of the global economies of about 80 percent. However, that can only happen if individuals in various sectors of the economy can conveniently save for their sunset years with ease.

Game changer
Since the plan was launched in August, it has been well received by many people who have hailed it as a game changer in the industry.

“Within the first month, 5000 members had registered for the pension plan. We are seeing a rate of between 300 and 500 new savers every day, indicating a positive uptake,” says Mr Simba. The company targets to have close to one million customers in the next one year.

It is the flexibility that comes with the plan that makes it a clear favorite for individuals keen on saving for retirement. It is very easy to register and make contributions via a mobile phone. It takes approximately two minutes for a new saver to start saving. They are required to fill in their ID numbers, full names and their set target amounts. The ID numbers are aligned to the mobile numbers and this helps to protect the identity of the savers.

Going forward, Octagon plans to introduce MOBIKEZA in its subsidiaries in Uganda and Zambia in the near future.

Octagon Pension Services is a registered administrator and is regulated by the Retirement Benefits Authority. Its key business is pension administration. It also engages its members through education and awareness creation in a bid to increase pension uptake.

The pension industry is about 20 years old since the enactment of the Retirement Benefits Act. According to Mr Simba, it is still a growing industry that has not yet matured in terms of infrastructure and awareness. “We have increasingly seen the funds grow from Kshs 50 billion to Kshs 1.2 trillion as of 2018. It means there is substantial growth in fund size, which is ideally close to 20 percent of the gross domestic product (GDP).”

Kenya has only 3 million savers, and about 80 percent come from the formal sector. In 2016, Retirement Benefits Authority reported that the retirement savings rate in the country stood at 13 percent, against the world’s average of 20 percent. Gross savings rate has also dropped by almost a half in 10 years according to statistics.

There is no doubt that the current unemployment rates of 43 percent signals the fact that people who are not employed do not have the disposable income to save. At the moment, old age poverty stands at around 55 percent. This data signals a scary scenario to look into the next 10 to 20 years.

In as much as we are in an economy that has no surplus income when it comes to saving, Mr Simba notes that there is need for people to understand the importance of saving for their tomorrow. That can only be achieved through education and awareness creation.

In this regard, Octagon has been at the forefront and has trained close to 70,000 members since 2010 through the Institute of Pension Management. Mr Simba is optimistic that with the launch of MOBIKEZA, the company is able to cast its nets wider in a bid to close in on the pension coverage.