Delivering Lesotho’s Old Age Pension

Katharine Vincent

DSA annual conferenceIDS, 18-20 September 2007

Slide 2/13 Brighton – September 2007

Lesotho’s vulnerability context

• April 2006 population census showed population has declined from 2.1 to 1.8 million

• Life expectancy is falling rapidly (37 years for females and 36 years for males)

• Two-thirds of the population live on less than US$2 per day; 43% on less than US$1 per day

• Ruling Lesotho Congress for Democracy committed to an old age pension on its election manifesto in 2002

• Although it was not introduced as a response to HIV and AIDS, it did recognise that the elderly are particularly vulnerable through now being a “generation of carers”

Slide 3/13 Brighton – September 2007

Key features of the Old Age Pension - 1

Year of introduction 2002

Month of first disbursement November 2004

Transfer amount and frequency

M200 per month (US$26)

Targeting Over 70s

Eligibility criteria Lesotho citizenNot in receipt of another pensionWith an accepted form of proof of age

Slide 4/13 Brighton – September 2007

Key features of the Old Age Pension - 2

Lead government ministry Ministry of Finance and Development Planning

Implementing partners Lesotho Post Office

Delivery system Cash disbursed through post office paypoints

Direct beneficiary numbers per year

Approx 77,000

Total cost per year Budget for 2007/08 is M180 million (US$23.4 million)

Slide 5/13 Brighton – September 2007

Approaches to delivery systems

• “Pull” mechanism

Beneficiary is required to come to a specific place at a specific time to receive their cash

• “Push” mechanism

Funds are transferred electronically into a bank account/onto a smart card/mobile phone which beneficiary can access at any time through financial infrastructure

Slide 6/13 Brighton – September 2007

The pension delivery system – Post Offices

• Post Office was chosen to deliver the pension based on its distribution throughout the 10 districts

• Other public buildings (chiefs offices, health centres, courts) are also used – making 291 paypoints in total

• Cash is transferred from the government account to post office account

Slide 7/13 Brighton – September 2007

Challenges of the pull mechanism-to government/post offices

• Mountainous landscape: poor road infrastructure and bad weather can make it hard to reach remote areas (military helicopter is used)

• Inclusion errors due to complexity of system and multiple paths of registration• people registering below the age of qualification• local authorities failing to notify deaths• corrupt officials creating “ghost” beneficiaries

• Problems of carrying cash• Armed robberies/cash-in-transit heists (now use Lesotho

defence force and mounted police)

• Costs: M12 per transaction (6% of transfer cost)

Slide 8/13 Brighton – September 2007

Challenges of the pull system-to beneficiaries

• Travel inconveniences in getting to the paypoint• High cost of using public transport• Time (although NUL study showed 75% take an hour or less)

• Large waiting times at the paypoint• Sometimes post offices run out of cash (although 68% had

never experienced this

• Dignity issues• 95% said the officials were respectful

• Higher risk of becoming victims of crime when transporting cash (although few beneficiaries cite this as a problem)

Slide 9/13 Brighton – September 2007

Innovative delivery mechanisms - cellphones

• Individualised multipurpose mobile smartcard• Expanding use and successfully introduced for mobile

cash transfer in Kenya (the m-pesa scheme) – like a parallel banking system where transfers are made by sms and payments/withdrawals are made through agents (retailers)

• As a push mechanism has advantages for both government and beneficiaries in terms of convenience and cost

• Thought to have potential in Lesotho due to good network coverage (although feasibility of other options will also be assessed)

Slide 10/13 Brighton – September 2007

RHVP pilot cellphone project in Lesotho

• 10 cellphones distributed amongst 3 women’s farming groups in different agro-ecological zones in Lesotho

• 1 to a chicken farming group at St Michael’s (lowlands)• 4 to a pig farming group in Nyakasoba (foothills)• 5 to a seed potato and vegetable farming group in

Semonkong (highlands)

• Intention was “to support remotely-located rural people and to connect them with markets, primarily” (Chaka Ntsane, RHVP Country Coordinator for Lesotho)

Slide 11/13 Brighton – September 2007

Follow up evaluation in May 2007 - advantages

• Access to communications has massively reduced the time spent on travelling (previously ladies in Semonkong would make a 4 hour round trip to meet within the cooperative at Bishop Allard Vocational School, whereas now they can call immediately and find whether there is a need for them to physically travel) – also wider benefits of accessing medical care in emergencies, etc.

• Helps them respond more quickly to the market, which has increased their sales

• Some younger ladies in Semonkong have started selling airtime through sms (acting as middlewomen)

Slide 12/13 Brighton – September 2007

Follow up evaluation in May 2007 - challenges

• 1 lady in Semonkong dropped her cellphone into water whilst doing her laundry: it is currently being repaired in Maseru

• Technological capacity – becoming accustomed to the cellphones took some time for women of a variety of ages

• Electricity availability is a problem for recharging• Although there have been no incidences of theft the

ladies recognise that having cellphones makes them a target – even from within their families!

• Airtime is prohibitively expensive compared to public phones, so little selling occurs (ZAR1.60 to ZAR2.90 per minute)

Slide 13/13 Brighton – September 2007

Current state of play

• The government of Lesotho is proud of the success it has had to date in implementing a national pension programme despite international financial institutions warning it would not work, and they are keen to continue being forward looking and a leader in southern Africa

• RHVP is about to begin a feasibility study looking at various innovative delivery mechanisms in Lesotho (including banking/debit cards, smart cards and cellphones)

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