Mission report: micro pension project in Central America

14-Mar-2011    Between March 7 - 11, 2011, a team of two P&D Network consultants visited the REDCAMIF office in Guatemala City, Guatemala.

Edo de Wit works as an actuarial consultant at the Dutch insurance company AEGON, in the department Corporate & Institutional Clients, and has ample experience in pension plan design and financing. Robert Timmer works as a management consultant at Mastermind Consultancy, and is very experienced with the administration and automation of group pensions.

Background of the P&D Network's technical mission

The origin of this visit lies in the initial contact between the P&D Network and REDCAMIF, which resulted in a strategic partnership between both organizations, focusing on the involvement of the P&D Network with the product development and implementation of REDCAMIF’s micro pension provision.

In 2009 REDCAMIF developed a pilot project for micro pensions, which intends to contribute to reducing poverty of micro and small entrepreneurs, self employed people and low-income families in Central America through the formation and accumulation of economic resources in the medium and long term. The project – financed by the Inter-American Development Bank and the government of Luxembourg - will be implemented by ten MFIs affiliated with the national microfinance networks in Guatemala (three), Honduras (three) and Nicaragua (four).

Within Central America, 60% of the working age population is employed in the informal economy. Since public social safety systems only cover salaried workers employed in the formal economy, informal workers are left without a social safety net after retirement. Broadly speaking, more than 90% of the population of Central America does not receive pension or social welfare benefits of any kind. While private pensions do exist, they are administered by the formal financial system. Consequently, workers in the informal economy - who are unlikely to have bank accounts and are suspicious of the financial system - are not involved in such private pension schemes.

To help reduce poverty among the beneficiaries (15,500 micro-entrepreneurs, small-business owners, non-salaried and low-income workers and their families in Guatemala, Honduras and Nicaragua), through the creation and accumulation of economic resources in the medium and long term, REDCAMIF has developed a pilot project for micro-pensions. This micro pension product will be distributed through the members (MFIs) of the REDCAMIF network, which reach many low-income workers and workers in the informal sector.

Progress of REDCAMIF's micro pension project

Starting in September 2010, the first phase of the REDCAMIF micro pension project, market research and feasibility study, has been completed. The market study determined that the potential demand of the Central American region for a micro pension provision covers more than 8.5 million people. Currently, the project finds itself at the end of the second phase (product development), almost ready to move into the third phase (implementation and evaluation).

Before continuing into the third and final project phase (implementation and evaluation), REDCAMIF has contacted the P&D Network to assess and examine the setup of its micro pension project.

Involvement of the P&D Network

The goal of the P&D Network's technical mission was to evaluate REDCAMIF’s micro pension project plan (PPR) regarding the:

  • Design and actuarial issues of the pension plan
  • IT and administrative aspects of the pension plan

After conducting site visits, meetings with future clients and delivering several presentations on pension provisions from a Dutch perspective, Edo de Wit and Robert Timmer had gathered sufficient information and insight to form an analysis on quick-scan level regarding the set-up of REDCAMIF’s micro pension project. The conclusions of their analysis has been presented to REDCAMIF in the form of a report, which includes recommendations on the product design, asset management, administrative infrastructure design and cost loading.


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REDCAMIF Micro Pension Project (Spanish)

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