Factors Affecting the Uptake of Voluntary Mbao Pension Savings by Informal Sector Traders in Nairobi City County, Kenya

Abstract

Africa's coverage of contributory private sector pension scheme of the working population age is still low with Mauritius having the highest private-sector coverage, and the pension scheme coverage of the informal-sector workers in East African countries is still low. In Kenya, the pension system reforms include the establishment of Retirement Benefit Authority in 1997 to regulate the pension schemes, amendment of the National Social Security Act in 2013 to allow voluntary membership to all adult citizens and the launch of the Mbao pension scheme in 2011 to ensure pension coverage of the informal sector which accounts for most of the jobs created in Kenya yearly, however, the overall pension coverage in Kenya is still low and the Informal Sector Skills and Occupation Survey reported that as at 2020, only a few of the informal-sector workers were members of National Social Security Fund while very few were in Mbao pension scheme.The general objective of this study was to evaluate the factors that influence voluntary Mbao pension savings uptake by informal sector traders in Nairobi City County, Kenya by targeting the traders in Gikomba market categorized into small-scale traders in food, clothes, shoes, artisans, and small scale kiosk owners. Specifically, the study assessed the effects of Mbao pension scheme design incentives, demographic factors and the traders’ attitude towards voluntary retirement savings with Mbao pension savings scheme in the past five years between 2016 and 2020.The study was guided by institutional savings theory, lifecycle savings theory, theory of planned behaviour and prospect theory. Descriptive research design and probability sampling technique was used to select a representative sample by classifying the traders according to the sector of trade and then a random sample of 384 traders were selected from the five sectors. Questionnaires were used to collect primary data which was analysed using descriptive statitics and inferential statistics of Binary logistic regression analysis aided by Statistical Package for Social Sciences software.The results of the binary logistic regression estimation model showed that Mbao pension scheme design incentives are statistically significant with a p-value less than 0.05, demographic factors were found statistically significant. Behavioral factors were also found statistically significant with a p-value less than 0.05.Retirement Benefit Authority regulator support was found statistically insignificant in moderating the relationship. Thus, Mbao pension scheme design incentives, demographic factors and behavioral factors significantly influence the uptake of voluntary Mbao pension savings by informal-sector traders in Nairobi City County, Kenya.The research suggests that Mbao pension scheme administrators together with the Retirement Benefit Authority engage in periodic and continuous awareness campaigns on Mbao pension scheme and consider setting aside funds yearly for this sensitization in their annual financial budget.