CEO of DHAN Foundation visits the Netherlands

29-Apr-2009    The DHAN Foundation and the Pension & Development Network are jointly initiating a micro pension pilot for poor people in India. On the 29th of April, the Executive Director of the DHAN Foundation, Mr. Vasimalai, visited the Pension & Development Network in the Netherlands.

The aim of the pilot is to reach people working in the informal sector, in both rural and urban areas, with differences in socio-economic and financial characteristics, family systems, income and cash flow. In an attempt to learn to know each other better, the Pension & Development Network interviewed Mr. Vasimalai.

What kind of micro pension product will DHAN Foundation implement?

In DHAN’s view the pension model should be more than a savings scheme. Longevity risk sharing should be included in the model. The type of benefit payment (lump-sum / annuity) is to be decided by the federations and groups.

The issue of voluntary or mandatory participation is decided by the groups of participants. Here the pension literacy within these groups will play an important role: when people understand the advantages of a pension they are more likely to participate voluntarily.

To achieve the goal of ensuring a pension for poor people, a baseline survey and feasibility studies will be conducted in order to understand demographic composition, occupation pattern and income levels of the target group. These activities will be accomplished during the first phase and will provide input for the second phase: finalizing the design of the micro pension scheme and the implementation.

What kind of people and how many do you expect to be interested in a micro pension product?

The DHAN Foundation works with over 700,000 poor and under privileged households in India, who are almost outside the social security net. These communities have expressed their interest in micro pensions. The micro pension pilot project is conceptualized to demonstrate that social security for poor people can be ensured by way of pension. We aim at developing a micro pension model in order to provide a micro pension product for 25,000 poor people working in the informal sector, in 5 years time.

How is supervision on micro pension products organized in India?

In India mutual pensions and insurance are a grey area in terms of regulation. DHAN needs to start a dialogue with the government and the regulatory bodies to get clearance for the pension scheme.

What kind of help do you receive from the Pension & Development Network?*

The Pension & Development Network supports the development of the pilot, by providing knowledge and expertise with various aspects of pension provisions. We receive feedback on the design of the survey, the model of the survey is created by the P&D Network, and we hope to receive support in pension literacy training, in order to to increase the risk awareness of federations, which leads to an informed decision regarding participation in the pension scheme.

 

*In July 2009, the Pension & Development Network teamed up with the DHAN Foundation in India. Their combined ambition to research the possibilities for implementing a durable pension provision for 25,000 people working in the informal sector has resulted in the signing of a "Memorandum of Understanding' and the start of a feasibility study.

 

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