The informal economy plays a critical role in Kenya, contributing significantly to economic growth and vitality.

Comprising diverse workers, from market traders and artisans to small-scale entrepreneurs and gig workers, this sector represents the backbone of the country’s workforce.

Yet, despite its significance, individuals in the economy often find themselves excluded from traditional pension arrangements.

The absence of employer-provided benefits and access to formal pension schemes leaves millions vulnerable, with little to no safety net to secure their futures when they are unable to work.

However, a transformative solution is emerging to address this challenge through the development and adoption of micro pension schemes.

These innovative programmes are designed to cater to workers in the informal economy, providing a flexible, accessible and inclusive approach to saving for retirement.

Unlike conventional pension systems that require regular and often substantial contributions, micro pensions allow individuals to save small amounts at their convenience, aligning with the irregular and unpredictable incomes typical in the informal economy.

This adaptability ensures that even those without access to formal banking systems can participate, bridging a critical gap in financial inclusion. This inclusivity is therefore a game-changer.

Micro pensions, leveraging mobile money platforms and digital technology, bridge this gap by making it easy for workers to contribute anytime, anywhere. But thet are more than just retirement savings tools; they are a lifeline for individuals navigating the uncertainties of the informal economy.

This sector is often characterised by precarious job conditions, inconsistent earnings and a lack of retirement benefits, making financial planning seem like an insurmountable challenge.

Gen Z and millennials, in particular, face a challenging paradox: they are tech-savvy, entrepreneurial and aspirational but are trapped in a system that offers minimal support for their long-term financial security.

Micro pension schemes offer them a way to turn even the smallest savings into a foundation for future stability. Over time, these modest contributions can grow, providing a financial buffer that helps workers weather the uncertainties of aging while offering the dignity of self-sufficiency in retirement.

Despite their promise, the adoption of micro pension schemes in Kenya has yet to gain traction and reach the scale needed to transform the informal economy. Achieving widespread implementation will require coordinated efforts from governments, financial institutions and civil society.

Public-Private Partnerships are essential to increase awareness and build trust in these programmes, while government policies must create a supportive environment that incentivises participation. Financial institutions, in turn, must innovate to develop products tailored to the unique and heterogenous needs of informal workers.

Technology, too, has a vital role to play, breaking down barriers to access and simplifying the process of saving.

Ultimately, the success of micro pensions lies not just in providing a means for workers to save for retirement but in offering a sense of stability and security to those long excluded from the benefits of the formal economy. These schemes represent a pathway to dignity, ensuring that retirement is no longer a privilege reserved for a few but a reality accessible to all.

By embracing micro pensions and expanding their reach, Kenya can take a significant step toward a future where financial inclusion is the norm, not the exception.

The journey toward financial security for the informal economy is a long one, but with the right vision, partnerships and commitment, it is a journey that can transform lives. Micro pensions hold the promise of reshaping the economic landscape, ensuring that every worker, regardless of their job title or income, can face the future with confidence and peace of mind.

The time to act is now, for the prosperity of the informal economy is inseparable from the prosperity of the nation itself.