1. Micro Pensions
An Oppertunity for MFIs
WorldGranny
Pension & Development Network
Global Microcredit Summit 2011 in
Valladolid
Microfinance and the Elderly
Caroline van Dullemen

2. Population ages – demography changes
Worldwide
1950
>60+ yrs = 205 mil
2000 x3
>60+ yrs = 606 mil
2050 x3
>60+ yrs = 2 billion

3. Paradox of development
People live longer, but the costs of living also
increase: both for societies & individuals
-Decline of economic growth
-Increase of old-age related costs
-Increasing budget strain for emerging economies
-Increasing burden for those living longer
- Women/mothers! are affected more than men
-Poor & informal sector workers uncovered
-Developments proceed rapidly!

4. Micropensions: opportunity for microfinance
sector
Demographic change global ageing
Socio-economic change breakdown of family support structures
Pension system 1st Pillar 2nd Pillar 3rd Pillar
• Social • Occupational • Personal
pensions private private
(government) pensions pensions
Reality in developing countries:
• In 86 low/middle income countries 1st pillar social pensions
• 2nd pillar available civil servants, military & middle class (provident funds)
• Exclusion of many informal sector workers in emerging markets

5. Micropensions: opportunity for microfinance
sector
Effects micro pension
• Security against old-age poverty, especially women/mothers
• Improve living standards in retirement incl family
• Shift of resources from survival towards investment;
• Through old-age income, older people play supportive role in
family structure;
• costs depend on scale/design/context

6. Challenges micro pension scheme
• Collection contributions in safe & efficient way
• Secure responsible and productive investment of
contributions
• Paying benefits timely and correctly
• Building trust, improve pension awareness and Longevity
Contractual
maintain effective communication
savings risk-sharing
• Ensuring effective and reliable governance
• Asset management
• Making optimal use of existing structures and
combine local and international expertise

7. Product development
Micro pension provision stakeholders
Institutional
How is the product Macro-
economic &
aspects
Administration
financial
developed? environment
Asset
Government
management
Contractual Longevity
savings risk-sharing
Target group Risks
Cultural aspects
Pension …
model

8. Product development
Micro pension provision
Variables in micro pensions
-eligibility age
-length of payment period
-minimum investment period
-minimum pension amount
-maximum amount of premium a client can afford
- operated through partner – agent model

9. Product development
Micro pension provision
Possible models of micro pension provisions
• Defined benefit (DB)- benefit is guaranteed, inflation poses biggest threat,
higher risk investments, risk is carried by MFI
• Defined contribution (DC) -benefit depends on investment returns
(reliable & profitable), risk with participant
• Hybrid solutions
– DB up to a basic level, DC on top of that basic level
– Collective DC; participants share risks and returns collectively
• Payout
- Options of either lump sum or buying annuity

10. Opportunity for microfinance sector
Micro pension provision
Potential for MFIs
- Long term commitment of client
- Attract savings & mobilize deposits
- Provide high quality product
- Solid base for scaling up (insurance)
- Realize market segment

11. Opportunity for microfinance sector
Micro pension provision
Potential for investors
- Long term commitment to MFI
- Growing demand & need
- Establish developing market segment
- Low cost (mobile banking)
- Compulsory option
- Product easily expandable

12. The Pension & Development Network
Pension
Insurance Banks
management
companies org. Asset
managers
Supervisor WorldGranny
Pension & Development Network
Government
Unions
Advisory
NGOs Universities organisations
Aims
•Building bridges between financial experts in the Netherlands
and the microfinance sector in emerging markets;
•Exchanging knowledge and experience.

13. The Pension & Development Network
Role of the P&D Network: social consultancy
- Development procedure of 3 phases:
1. Market research/feasibility
2. Product Development
3. Implementation & execution
Timeline of 1 – 2 years
- Provide consultancy and Tech Ass / training

14. Running & future projects of the P&D Network
Tajikistan
Georgia
Mongolia
Guatemala, Philippines
Honduras &
Nicaragua
Kenya Laos &
India Sri
Vietnam
Lanka

15. Lessons learned
•Ageing population demands pension provisions;
•Future pension coverage will need to cover informal sector;
•Most emerging economies lack private pension scheme;
•Insurance sector is scaling up & attracting investments;
•Strong need for reliable savings product amongst middle class,
Contractual Longevity
savings risk-sharing
lower class and the poor;
•Understanding of changing traditional family support system;
•Global ageing not yet on agenda governments;
•Micro pensions are not a quick win
•Trust is the most important issue

16. Thank you!
Contact
Cvdullemen@worldgranny.nl
www.pensiondevelopment.org
Twitter: @Pension4All