Mazima Retirement Plan Presents a Challenge to Uganda's FinTech Startups

On Thursday, this week, Mazima Retirement Plan and Financial Services Deepening Uganda (FSDU) together with Uganda Retirement Benefits Regulatory Authority (URBRA) and the Competitive Secretariat of the Ministry of Finance, Planning and Economic Development (MOFPED) as well as Callund Consulting organized a one day workshop at Hotel Africana.

The workshop was aimed at the discussing the findings of a feasibility study for micro-pension market in Uganda. It was carried out by Callund Consulting (UK) and Micro-Pension Foundation (India) with Support from FDU.

According to the study, Uganda, and indeed other developing countries are grappling with the question of how to extend pension to the informal sector. Therefore, the question at the workshop was whether micro-pension can be the solution.

According to Livingstone Mukasa, Micro-pension is used to refer to a form of insurance that allows small contributions over sustainable long periods.

Micro-pension is an opportunity to allow every working Ugandan make an affordable contribution according to their age or income towards their retirement package - Livingstone Mukasa

Currently, there's significant exclusion when it comes to savings for retirement. Until last year, when Mazima Retirement Plan and Kampala City Traders Association were granted licence to operate as the very first informal retirement plans, National Social Security Fund (NSSF) was the only available option for anyone who thought of saving for their retirement - yet it only covers those in formal employment.

Uganda is estimated to have 15 Million in employment but only around 2-3 Million are covered by NSSF. This means the remaining, who are largely in informal sector had no way to save for their retirement. With the introduction of Mazima Retirement Plan, which is leveraging the already adopted telecom platforms of mobile money, informal employers as well as employees are able to save for their retirement.

Mazima Retirement Plan, which started just in March 2016, currently has a number of over 720 subscribers with savings amounting to 400 Million. They are working in partnership with Housing Finance Bank as the scheme’s custodian and African Alliance Limited as the Fund Managers. Currently, one can save using Airtel and MTN Mobile Money platforms to easy collection of member savings but standing orders and direct deposits are also accepted.

One of the challenges, according to Livingstone, that Mazima is facing is trust - which issue is faced by any plan or company that handles people's money. Naturally, people are not quick to trust someone with their money. However, Livingstone is optimistic that the endorsement from the regulatory authority as well as partnerships with the telecom companies can help address this issue.

One of the challenges that Livingstone Mukasa hinted on was the fact that Mazima needs to work on its technology. What is even more exciting is that he believes in locally bred solutions which is a very huge opportunity for local fintech startups that are dedicated to solving such problems.

We need to work on our platform. We don't think our technology is where we need it to be in form of serving our clients and i think that can be done in Uganda - Livingstone Mukasa

Given that very few people in their prime age have had no retirement packages, apart from depending on their sons or daughters in the working age bracket. This had eventually become a viscous cycle making it impossible for one to set aside an income that they can invest for the future. The question is whether the plan can eventually be able to translate into a breeding ground for the next generation of local investors?

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