Caroline Van Dulleman, When Clients Grow Old
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Transcript of Caroline Van Dulleman, When Clients Grow Old
Micro Pensions An Oppertunity for MFIs
WorldGranny
Pension & Development Network
Global Microcredit Summit 2011 in Valladolid
Microfinance and the Elderly
Caroline van Dullemen
Worldwide
1950
>60+ yrs = 205 mil
2000 x3
>60+ yrs = 606 mil
2050 x3
>60+ yrs = 2 billion
Population ages – demography changes
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!
Micropensions: opportunity for microfinance sector Demographic change global ageing
Socio-economic change breakdown of family support structures
Pension system
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
1st Pillar
• Social pensions (government)
2nd Pillar
• Occupational private pensions
3rd Pillar
• Personal private pensions
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
Challenges micro pension scheme
Contractual savings
Longevity risk-sharing
• Collection contributions in safe & efficient way
• Secure responsible and productive investment of contributions
• Paying benefits timely and correctly
• Building trust, improve pension awareness and maintain effective communication
• Ensuring effective and reliable governance
• Asset management
• Making optimal use of existing structures and combine local and international expertise
Contractual savings
Longevity risk-sharing
Pension model
Cultural aspects
Target group
Government
Macro-economic &
financial environment
Institutional aspects
Administration
Asset management
Risks
…
Product development Micro pension provision stakeholders
How is the product
developed?
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
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
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
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
WorldGranny Pension & Development Network
Unions
Universities
Advisory organisations
Government
NGOs
Banks
Supervisor
Asset managers
Pension management
org.
Insurance companies
Aims •Building bridges between financial experts in the Netherlands and the microfinance sector in emerging markets; •Exchanging knowledge and experience.
The Pension & Development Network
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
Running & future projects of the P&D Network
Mongolia
Guatemala, Honduras & Nicaragua
Georgia
Philippines
Kenya India
Laos & Vietnam
Sri Lanka
Tajikistan
Lessons learned
Contractual savings
Longevity risk-sharing
•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, 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
Thank you!
Contact
www.pensiondevelopment.org
Twitter: @Pension4All