1 THE COVERAGE GAP: EXTENSION OF SOCIAL SECURITY COVERAGE TO THE INFORMAL SECTOR EMPLOYEES IN TANZANIA WARSAW, POLAND, 5 – 7 MARCH, 2007 ELIAS E.M. BARUTI RESEARCH & INVESTMENTS MANAGER LAPF – TANZANIA INTERNATIONAL SOCIAL SECURITY ASSOCIATION 5 th INTERNATIONAL RESEARCH CONFERENCE ON SOCIAL SECURITY

ISSARC/POLAND/TZ 2 A PRESENTATION ON THE EXTENSION OF SOCIAL SECURITY COVERAGE TO THE INFORMAL SECTOR EMPLOYEES IN TANZANIA

ISSARC/POLAND/TZ 3 AGENDA Introduction (Background). The Informal Sector (IS) in Tanzania Extension of social security coverage -Rationale for Extension of Social Security -Strategies for Extension of SS. -Role of Stakeholders in facilitating extension of social security Conclusion and recommendations

ISSARC/POLAND/TZ 4 1.0Introduction The Social Security System in Tanzania has been in existence for more than 60yrs. The System is fragmented i.e., there are seven Social Security Institutions (SSIs); each covering a defined category of people. The existing SSIs covers only less than a million people out 34.5 million Tanzanians i.e., The covered population represent 5.3% of the effective labour force estimated at 19 million people.

ISSARC/POLAND/TZ 5 Fig. 1:Map of Tanzania

ISSARC/POLAND/TZ 6 1.0Introduction Contd The majority continue to be left out of the coverage of formal social security. The uncovered population include the self employed and Informal sector employees (ISEs). The risks facing ISEs include lack of permanent business premises, seasonality of income. This paper focus on the seasonality of income in illustrating how micro credit facility can be used to extend social security coverage.

ISSARC/POLAND/TZ 7 2.0THE INFORMAL SECTOR IN TANZANIA The informal Sector (IS) in Tanzania: Contributes about 20% of the countrys GDP Contributes about 20% of the countrys GDP Provides employment to 30% of the total active labour force. Provides employment to 30% of the total active labour force. Despite this significant contribution, ISEs continue to be excluded from the formal social security coverage. Despite this significant contribution, ISEs continue to be excluded from the formal social security coverage.

ISSARC/POLAND/TZ 8 2.1The Vulnerability of ISE Most of the urban ISEs are mainly engaged in economic activities such as: cloth making (embroidery, tailoring, tie and dye), hair dressing salon, handicrafts, petty trading (small shop keeping and hawking); and food and fruit processing.

ISSARC/POLAND/TZ 9 2.1The Vulnerability of ISE Contd The IS is characterized by: Seasonality in earning income i.e., irregularity in generating income, Seasonality in earning income i.e., irregularity in generating income, Lack of permanent business premises, Lack of permanent business premises, low productivity, low productivity, Low incomes. Low incomes.

ISSARC/POLAND/TZ The Priority Social Security needs for ISEs The social security needs for ISEs are Credit facility, training, access to market, loans and working tools. The priority social security needs for ISEs are Credit facility, training, access to market, loans and working tools.

ISSARC/POLAND/TZ The Institutions providing social security to ISE There are two main categories namely; formal and Traditional SSIs. The Formal SSIs include: GEPF, LAPF, NHIF, NSSF, PPF, PSPF and ZSSF, The Formal SSIs include: GEPF, LAPF, NHIF, NSSF, PPF, PSPF and ZSSF, The non-formal (including Traditional) SSIs are SACCOS, ROSCAS, and ABSs The non-formal (including Traditional) SSIs are SACCOS, ROSCAS, and ABSs Others (NGOs, Religious bodies, Micro credit Institutions etc). Others (NGOs, Religious bodies, Micro credit Institutions etc).

ISSARC/POLAND/TZ The Extension of Social Security Coverage to ISE 3.1The Rationale for Extension of Social Security Coverage to ISE The Social Security Schemes in the developed countries have coverage of over 80%, The Social Security Schemes in the developed countries have coverage of over 80%, The developing countries cover an average of less than 10% of the active population, The developing countries cover an average of less than 10% of the active population, The coverage in Tanzania is 5.3% of the active population. The coverage in Tanzania is 5.3% of the active population.

ISSARC/POLAND/TZ The Strategies for extension social security to ISE The strategies are: Establishment of Partnership between MCIs/SACCOS and SSIs. Establishment of Partnership between MCIs/SACCOS and SSIs. Establishment of a specific Unit or department within each of the existing SSIs to cater for ISEs; and Establishment of a specific Unit or department within each of the existing SSIs to cater for ISEs; and Establishment of a specific scheme with a defined regulatory framework to cater for ISEs. Establishment of a specific scheme with a defined regulatory framework to cater for ISEs.

ISSARC/POLAND/TZ The Roles of Stakeholders in facilitating extension social security to ISE The Government (TZ- Vision 2025, NSGRP, PBFP) The Government (TZ- Vision 2025, NSGRP, PBFP) SSIs (Introduce benefits packages that reflect priority social security needs of ISE; and SSIs (Introduce benefits packages that reflect priority social security needs of ISE; and MCIs/SACCOS. MCIs/SACCOS.

ISSARC/POLAND/TZ Conclusion Tanzania has several social security arrangements, however the majority continue to remain without formal social security protection; Tanzania has several social security arrangements, however the majority continue to remain without formal social security protection; The coverage of 5.3% out of 19.0million Effective labour force for sure calls for a need to adopt new strategies, The coverage of 5.3% out of 19.0million Effective labour force for sure calls for a need to adopt new strategies, Micro credit is described as one of the strategies for extension of social security to the ISEs. Micro credit is described as one of the strategies for extension of social security to the ISEs.

ISSARC/POLAND/TZ Recommendations Three phases are recommended for extension of SS to ISEs in Tanzania: The SSIs can use existing MCIs to extend SS coverage by introducing social security product in their current loan packages; The SSIs can use existing MCIs to extend SS coverage by introducing social security product in their current loan packages; The SSIs can establish an autonomous Unit to cater for ISEs; The SSIs can establish an autonomous Unit to cater for ISEs; Establishment of a specific scheme to cater for ISEs. Establishment of a specific scheme to cater for ISEs.

ISSARC/POLAND/TZ 17 Fig. 2: Potentials of Informal Sector

ISSARC/POLAND/TZ Recommendations Three phases are recommended for extension of SS to ISEs in Tanzania: The SSIs can use existing MCIs to extend SS coverage by introducing social security product in their current loan packages; The SSIs can use existing MCIs to extend SS coverage by introducing social security product in their current loan packages; The SSIs can establish an autonomous Unit to cater for ISEs; The SSIs can establish an autonomous Unit to cater for ISEs; Establishment of a specific scheme to cater for ISEs. Establishment of a specific scheme to cater for ISEs.

ISSARC/POLAND/TZ 19 Fig. 3: Way forward- Joint efforts Storming Norming Performing Forming

ISSARC/POLAND/TZ 20 THANK YOU ALL FOR YOUR PATIENCE IN LISTENING TO ME AKSANTE KWA KUNISIKILIZA