Savings

Econet Life’s Dura/Isiphala to boost informal sector savings

The Chronicle

The Dura/Isiphala pension fund recently launched by ECOCASH Life, mainly targeting employees in the informal sector, such as carpenters, taxi drivers, cleaners, gardeners, welders, shoemakers and traders, among others , has all the necessary ingredients to encourage a culture of savings and provide a social safety net for older people.

Zimbabwe, according to the International Monetary Fund, has the second highest informal sector in the world, after Bolivia.

However, this important sector, which houses more than 60% of the country’s workforce, has no savings or retirement funds to support them.

The introduction of the Dura/Isiphala pension fund changes all that. This innovative program from the life insurance company EcoCash Holdings, offers workers in the informal sector a voluntary mechanism to pool and invest their savings.

Enrolling in Dura/Isiphala is fairly straightforward for any Zimbabwean between the ages of 18 and 55. Enrollment and retirement contributions start from just $10, and it can all be done at Econet, Steward Bank, AFC Bank and EcoSure stores across the country.

Shortly after registration, recipients will be able to use the investment as collateral to access short-term loans, earn interest and access a portion of their investment after 12 months.

Key to the success of this innovation is the realization that low-income earners can easily make small contributions to retirement savings at relatively low cost, with flexible withdrawal terms and easy participation.

Dura/Isiphala has struck a delicate balance between the need for long-term savings and the impending demands of life that necessitate early withdrawal in certain circumstances.

Econet Life said it came up with the idea for Dura/Isiphala because it understands that it is important to address the financial security concerns of older people among workers in the informal sector due to its large size.

“Financial security in old age is of particular concern for women, as they typically outlive their male counterparts. This concern is reinforced by the fact that women tend to have lower labor force participation rates than men, have less access to property and have weaker property rights than their male counterparts,” said the society.

“Women also tend to rely more on informal employment. Even when employed or retired from the formal sector, women are at a disadvantage compared to men in providing income security for the elderly. They tend to have a lower earning capacity than men and often leave the labor market to raise children.

Benefits of Dura/Isiphala

The fact that members can make such small contributions to retirement savings without the risk of penalties helps demystify the notion that saving for later in life is only for people with an income. available.

Additionally, the fact that there is no need to engage directly with formal financial institutions removes a common barrier to the participation of workers in the informal sector.

The system design has a number of attributes that contribute to its effectiveness. A key benefit is that all informal sector workers’ contributions are pooled.

This creates economies of scale in the investment of funds and there is a benchmark for the worker’s retirement planning needs.

A second benefit is that members have the ability to contribute whatever they want each month and from anywhere in the country.

The fund also helps increase financial literacy by raising awareness of the importance of saving for the future to ensure income smoothing across the life cycle. This includes educating about the importance of insuring against longevity risks and emphasizing that it is possible for people to live longer than expected, which could become costly.