As the backbone of Kenya’s economy, micro, small, and medium enterprises (MSMEs) are the driving force behind economic growth and job creation.
The MSMEs account for more than 98 percent of all business entities in Kenya and provide about 30 percent of job opportunities annually.
However, the majority of the workforce, especially in the informal sector, lacks access to secure retirement savings. According to the Kenya National Bureau of Statistics, as of 2023, more than 13.9 million Kenyans have no form of retirement savings scheme.
This low savings rate can be attributed to limited financial literacy on available financial products, particularly among small businesses.
MSME owners often prioritise the day-to-day operations and survival of their businesses over long-term planning, overlooking the importance of retirement planning solutions for their employees and in most cases, for themselves as well.
An exit plan for the founders at the appropriate age with a financial fallback is likely to give the business new impetus for growth as a younger generation takes over as the founders retire confidently.
However, the implications of this oversight can be far-reaching. Skilled and experienced staff are the lifeblood of any successful MSME. Their departure can severely impact a company’s ability to maintain a competitive edge.
Retirement planning solutions can be a powerful tool for MSMEs to attract and retain top talent. By offering a retirement plan, MSMEs can differentiate themselves from competitors and show their commitment to the long-term well-being of their staff.
This, in turn, foster a sense of loyalty and job satisfaction, leading to improved retention and a more stable workforce.
Moreover, the benefits of retirement planning extend beyond just employee retention. By investing in their employees’ financial future, MSMEs can cultivate a more engaged and motivated workforce.
Employees who feel valued and supported by their employer are more likely to be productive, innovative, and dedicated to the firm success. This can translate into tangible improvements in overall business performance and competitiveness.
To capitalise on these benefits, MSMEs in Kenya must take proactive steps to implement retirement planning solutions.
This may involve partnering with financial institutions that offer tailored retirement plans, such as personal pension plans or provident funds and umbrella schemes.
By understanding the different options available and engaging employees in the planning process, MSMEs can ensure that the chosen solution aligns with the needs and preferences of their workforce. These solutions help employees build a secure financial future beyond employment.
One innovative approach to enhancing retirement planning solutions for MSMEs is to integrate financial education and advisory services into the mix.
By providing their staff with comprehensive financial literacy training and personalised investment guidance, they can empower their workforce to make informed decisions about their retirement planning.
This can include topics such as budgeting, asset allocation, and risk management, equipping employees with the knowledge and tools they need to achieve their long-term financial goals.
MSMEs can also explore the possibility of offering matching contributions or other incentives to encourage employee participation in the retirement planning.
This can further demonstrate the MSME’s commitment to its employees’ financial well-being and create a sense of shared responsibility for the success of the retirement plan.
By incorporating these additional elements into their retirement planning solutions, MSMEs can create a more holistic and impactful programme that addresses the unique needs and challenges of their workforce.
This can not only enhance employee retention and engagement but also contribute to the overall financial stability and resilience of the Kenyan workforce.
It is time for MSME owners to prioritise retirement planning and take the necessary steps to secure the financial well-being of their employees and the future of their enterprises.
By doing so, they can pave the way for the continued success and growth of the MSME sector in Kenya.
The adoption of retirement planning solutions is a strategic imperative for MSMEs. By investing in their employees’ financial future and providing them with the tools and resources they need to achieve their retirement goals, MSMEs can unlock a powerful competitive advantage, build a loyal and motivated workforce, and ensure the long-term sustainability of their businesses.
The writer is the Britam Life Assurance CEO and Principal Officer
