In most of the Sub-Saharan African (SSA) countries, blue-collar workers and the urban middle class are provided with access to relatively generous and modern old age income protection systems, while rural inhabitants and informal sector workers continue to rely on tradition social protection mechanisms. In particular, the latter were designed around the family and the community as the only institutional providers of social security in the pre-colonial era. Indeed, prior to the institution of colonial administration in SSA countries, there was no clear distinction between work and retirement as distinct phases of life in African culture. Economic activities were part of the normal routine of life and they were organized on a subsistence basis. Therefore, elderly used to continue to farm, hunt, fish and mine until due to ill-health or age related frailties they could have no longer done so. At that point, families used to provide for their elder.
The African family continues to play a dominant role as an institutional provider of old age security. Phrased differently, the “familiar social net” played a role similar to that of a pay-as-you-go system in industrial countries' pension schemes. The second-pillar of the traditional system was represented by community-levels arrangements, namely the rotational saving schemes: member used to pay specific amounts periodically into a common pool. The funds were later distributed back to members according to some criteria like old age, illness, unemployment or disability.
During the colonial era new Retirement Income Systems were introduced in SSA countries, reflecting the way the major colonial powers used to consider the governance of their colonies: assimilation for France (who considered the people colonized as potential French Citizens), indirect rule for Great Britain (who perceived the metropolitan state as distinct from the colonies). Therefore, while the French directly implemented their national laws by introducing a relatively generous social security system and state-based programs, the British supervised an already existing pension system designed around families and communities and implemented a non-contributory defined benefits pension schemes only for workers in the public sector. The colonial influence and the subsequent processes of urbanization and modernization affected the post-independence social security net of the Sub-Saharan Countries, threatening the traditional institutional framework.
This paper by Kpessa (2010) provides a useful framework on the development of pension systems in Sub-Saharan countries; it may be pivotal for the introduction of micro pensions and, broadly speaking, micro finance products in that area. What is really interesting, indeed, is the deep analysis the author makes of the familiar and social ties in those African countries as determinant of both pre-colonial and post-colonial eras. The analysis suggests a careful design of micro pension and micro finance products that have to be tailored according to the needs and the traditions of different countries. In other words, the design of a particular financial instrument has to take into consideration the externalities and the benefits that its implementation may create across the entire community that the beneficiary belongs to.