FACTORS INFLUENCING PARTICIPATION IN THE PENSION FUND AMONG INFORMAL SECTORS´ WORKERS IN TANZANIA

The informal sector is crucial in the development of several developing countries as a large percentage of workers are employed or self-employed in this sector. According to the International Organisation of Pension Supervisors Report (2011) which was approved by Social Security Regulatory Authority, approximately 89.2 percent of the labor force in Tanzania belongs to the informal sector (https://www.oecd.org/countries/tanzania/49650309.pdf).The participation of the informal sectors’ workers in the pension fund is minimal. This in turn deprive them of their social security rights which are regarded as basic human rights by International Labour Organization (ILO,2002). This paper examined the factors which influence participation in the pension funds among the informal sectors’ workers in Tanzania. Probit model was used in evaluating the data which were collected from 180 informal sectors’ workers and 40 staffs of Public Service Social Security Fund through questionnaires. The study revealed that age, level of education, income, presence of a trade union, presence of a written contract between employer and employee, fair contribution rate and membership in other forms of social protection were significant factors in influencing the participation in the pension fund among the informal sectors’ workers in Tanzania. The notable findings of this research are the impacts of trade union, written contract and membership in other forms of social protection on the probability of joining the pension fund among the informal sectors’ workers. The presence of the trade union and written contract had positive effect on the probability of joining the pension fund while membership in other forms of social protection had a negative effect on the probability of joining the pension fund. Surprisingly,96.12% of the respondents had trust in pension funds and good perception on the performance of the pension funds in Tanzania. Furthermore, the study revealed that 84.44% of the respondents who were not members of any pension fund were willing to join the pension fund. The study proposes the following strategies on expansion of social security coverage: introduction of more attractive benefit packages, use of mobile money approach for remittance of monthly contribution, raise awareness on the importance of social security, use of aggressive door to door technique in registering new members, re-introduction of partial withdrawal benefit, pension funds should establish partnership with trade unions, employers’ association and co-operatives, pension funds should be flexible in collection of contributions, fast payment of benefits, government should register all employees and employers of the informal sectors, Ministry of Labour should sensitize employers on the importance of social security by issuing a guideline to all employers within the country, pension funds should introduce simple registration procedures, introduction of autonomous social security regulatory authority, establishment of auto - enrollment into pension funds, informal sectors’ employers and employees should be encouraged to form the groups or association which will be vital in accessing the loans from the banks and other microfinance institutions