1 THE CHALLENGE OF COVERING THE INFORMAL SECTOR: The Philippine SSS Experience CORAZON S. DE LA PAZ President and CEO Social Security System, Philippines November 30, 2006

2 Introduction Strong World Economic Growth Growth in Formal Sector Employment

3 Introduction Rising prosperity and better opportunities Many have not shared in the benefits of the progressive world.

4 Introduction Expansion of the Informal Economy:  Self-employment  Petty trade  Domestic service  Part-time work  Odd jobs without contract

5 Introduction Growth of Informal Sector Sector where poverty is acute Extension of social security coverage becomes an even more universal concern Globalization failed to create enough opportunites

6 Philippine Informal Sector

7 Source: July 2006 Labor Force Survey, Philippine NSO

8 Philippine Informal Sector (Percent Distribution of Employed Members)

9 The Philippine SSS Program Contingencies covered:  Old age  Disability  Work-related injury  Death  Sickness  Maternity

10 The SSS Program Loan Privileges: Salary Loans Housing Loans Business Loans n Flexi-Fund Program for OFWs Enrolled 61,070 OFWs as of end-2005 Total member’s equity of US$1.94-M, as of July 2006

11 The SSS Program Coverage and Membership As of end-Jun 2006

12 The SSS Program 5.6-M 1.7-M

13 Total SSS Membership Self-employed/Voluntary Members The SSS Program 21% 8.8%

14 The SSS Program Issues on Coverage of Informal Sector Willingness to be covered in the first place Sustainability of member compliance  Enforcement and monitoring of compliance  Irregularity of income flows makes it difficult for workers to meet qualifying conditions for membership or the capacity to sustain monthly contributions

15 The SSS Program Issues on Coverage of Informal Sector Serious compliance and evasion problem at SSS  Of the total SSS membership only one- third (8 million) are paying  Of the total self-employed less than one- fifth are paying

16 Current Initiatives Branch Tellering  Ability of partner banks to accept payments of SSS SE/VMs is constrained by the bank’s needs to service other and more profitable clients  Designed to facilitate payment of premiums and loan accounts of informal sector workers  Response to the restricted banking hours when SSS payments may be accepted

17 Current Initiatives Remittance thru other payment schemes  Self-service facilities like payment kiosks in major SSS branches  “Bayad” Centers or Payment Facilities  Collection thru Third Party Agents  Payment thru Philpost  Payment thru the Internet and ATMs  Payment thru SMS (Texting)

18 Current Initiatives Payment thru Cooperatives  No employer to act as conduit between the SSS and informal sector workers, hence, more administratively costly  Cooperatives and People’s Organizations play the role of employers for workers in the formal sector  Accreditation of Cooperatives and People’s Organizations  Provide monetary incentives to encourage their members to pay SSS contributions as collecting agents

19 Current Initiatives Daily Remittance Scheme  Undertaken in collaboration with the Department of Labor, the Philippine Savings Bank and the Development Bank of the Philippines  Informal sectors are encouraged to make daily deposits in order to cumulate an amount equal to a monthly SSS contribution  Underlying Logic: If given the opportunity, low income households will divert a small level of disposable income from immediate consumption to future expenditure needs

20 Current Initiatives Support for Small and Medium Enterprises  SSS supports the development and expansion of the productive capacity of SMEs, export and housing industries, tourism industries and cooperatives  Done thru the:  SSS business and social development loans such as the SME Unified Lending Opportunities for National Growth (SULONG) Program  SSS-GSIS Special Financing Program  Financing Program for Tourism Projects  Financing Facility for SMEs to support the barangay micro-business program of the government

21 Current Initiatives Quality Service  Additional receiving centers in the metropolis  Covenant of Service Pledge to reduce processing time for benefit claims and loan applications Bring SSS closer to its long-term vision to deliver “real time” services thru streamlined procedures, effective IT support, and optimal deployment of trained personnel Substantial reductions in processing time for loans and benefit transactions

22 Current Initiatives Increase in Minimum Salary Credit  Higher MSC for SE/VMs from US$20  Objective: To set and maintain a salary range that is sustainable for contributory social security scheme

23 Conclusion The Challenge of covering the informal sector and capturing their contributions is formidable.

24 Thank You