In line with the vision to make Rwanda a country of development and better life for all; considering the importance of protection of social risks as a major component of inclusive social economic development.
For many years, diverse social security programs have been developed in Rwanda. This justifies the need for a national social security policy which for coordination and provision of all necessary orientation.
The objective of Rwanda social policy is to analyze the current social security program in order to identify the gaps in different areas and to propose how to improve the program with as central goal to provide for all Rwandan population adequate protection against the adverse consequences of various “life cycle” events and risks.
Poor Rwandan households are particularly vulnerable to these risks, which can undermine social stability and economic well-being. This policy is premised to facilitate a framework for narrowing the gaps and eliminating them over time as economic circumstances permit.
Modalities of Government Intervention
There are a number of different ways in which the government can ensure that the Rwandan population has access to social security benefits.
The organizations established to provide for the provision of each component of social security may be governmental or private sector institutions, or some combination of the two.
The government may institute programs that require compulsory participation or provide tax and other incentives to induce voluntary participation, or simply provide access to well-regulated insurances that citizens may or may not choose to utilize.
Other strategies already underway in Rwanda also strengthen the national social security infrastructure. For example, national employment creation and economic promotion strategies aim to increase the rate of economic growth and create jobs.
As the formal sector expands, social security coverage will expand as well, because the Rwandan program, with the exception of medical care, is tied to formal sector employment.
Because the vast majority of the working population works in the informal sector including agriculture, the government, however, must take additional steps to cover this population.
The implementation of health care insurance schemes in rural areas is the most successful effort to date to expand a type of social security to the informal sector.
Major issues in social security programs in Rwanda
The most important issue in social security in Rwanda is its little coverage, especially for retirement and professional risks schemes which are a privilege for precisely those who have the privilege to access employment in formal sector.
t is not acceptable to have more than 90% of the active population excluded from benefiting part of their fundamental rights. In addition to this, not only existing branches are reserved to a small portion of the population, but also many other branches are not yet covered in the programs.
However the recent development in health insurance is a positive exception to this. For existing branches, the benefits are not sufficient and there is serious concern that financial sustainability is not assured.
Therefore important adjustments on major parameters will be needed in order to guarantee sufficient benefits financed by fair contributions. For pension schemes, the issue of insufficient benefits for many of the beneficiaries despite generous formula must be addressed in particular, thus justifying the need to create additional pillars.
Vision for Social Security
The government of Rwanda is committed to develop all necessary programs and mechanisms aimed at attaining the ideal situation of «Social security coverage for all», rooted in the universal declaration of human rights which consecrates social security among fundamental social rights.
Concretely universal social security coverage means that all Rwandans be covered with maximum benefits possible for retirement and key pre- retirement benefits such as housing and education, for professional risks benefits, sickness benefits, maternity benefits, health care, and eventually unemployment benefits when social and economic conditions will allow this last branch to be implemented.
Specific objectives for the year 2020
The objective set in the social security policy document describes the coverage of social security expected by the year 2020 in terms of vertical (branches) and horizontal (population) coverage.
Every resident in Rwanda must have a pension cover either by a public pension scheme or by a private one
First pillar based on “defined benefits” scheme will remain mandatory for the whole formal sector with 100% coverage.
Composed of complementary pension scheme on a “defined contribution “ model, and schemes for pre-retirement benefits namely housing and education, will be also mandatory for formal sector.
For the rest of the population adhesion to pension scheme will be also mandatory, with free choice to adhere either to a private pension scheme, or to the pension scheme managed by the public provident fund.
Occupational hazards branch
Will remain mandatory for formal sector with 100% coverage, It will be open to allow adhesion of all workers in organized groups of informal sector, especially cooperatives, with target to reach at least 70% coverage.
Health Care Branch
The vision of Rwanda is to achieve the goal of health for all through universal health insurance.
Maternity and Sickness branches
Will be mandatory for all formal sector; similarly to occupational hazards, intensive sensitization programs and appropriate incentives will contribute to promote voluntarily adhesion of at least 70% for urban and rural informal through organized groups
This scheme will be introduced as soon as economic conditions will allow it.
CURRENT STATUS OF THE SOCIAL SECURITY REGIME IN RWANDA
According to the sector policy the social security management in Rwanda is fragmented with pension and occupational risks branches being administered by the Social Security Fund of Rwanda, and medical insurance being managed under three schemes, namely, RAMA, MMI and Mutuelles de Santé.
The pension branch of the NSSF provides insurance against the risks associated with old age, disability and death. It is primarily aimed at providing retired persons with an income on a basis proportionate to number of years worked and wages earned (and the level of employee and employer contributions to the program).
Coverage and Benefits
Pension coverage is generally limited to those individuals who are employees in the formal sector – approximately 7% of the working population of the country. Actual estimates indicate that only 5.6% of the working population (2.3% of the total population) is covered.
48,363 Rwandan pensioners were receiving old-age pensions as of 2006.
The average monthly pension is Rwf 3,477 (USD 63). Individuals are eligible for a monthly pension at the age of 55 if they have accumulated 15 years of service, or at age 65.
The amount of the pension paid is based on a formula that takes into account the level of wages earned and number of years of service in the formal sector.
Disability insurance coverage is providing to the same individuals. Disability pension is paid to those who have lost 50% or more of earning capacity, have at least 5 years’ contribution history, and have actively contributed for 6 of the last 12 months prior to the onset of the disability.
Disability is assessed periodically by a doctor approved or appointed by the NSSF. NSSF calculates the disability pension under the same benefit formula as old-age pension, except that the claimant is credited with only 6 months of coverage for each year that a claim is made before age 55.
For both types of pension, pensioners receive a minimum pension equal to 50% of the minimum wage (at the time payment level is determined). The monthly pension paid is adjusted for inflation only on an ad hoc basis by Presidential Decree, resulting in a substantial erosion of the real value of the pension over time.
The last such increase was in 2002. After the pensioner dies, the surviving spouse (and children up to the age of 25 if still students) of a pensioner continues to receive the pension until his or her death.
The Pension Branch’s benefits are primarily financed by employer and employee contributions. The contribution rate is 6% equally shared between employer and employee.
Additional financing comes from penalties that are charged for late declaration and payment of contributions and the gains obtained from the NSSF’s investment. Investment returns, however, have been below the inflation rate.
Governance and Management
The parliament enacted the draft law to reform NSSF governance. The NSSF recently took steps to improve the governance of its asset management function, establish a transparent investment policy and improve its capacities in this area.
A recent actuarial valuation identified deficiencies in recordkeeping and information technologies and the contribution remittance process.
Professional Risks Branch
The Professional Risks Branch protects households against the risk of income loss due to work accidents or work-related illnesses.
Coverage and Benefits
The Professional Risks Branch covers workers in the formal sector. Employed persons are covered regardless of the nature of their work or the extent of their exposure to hazardous working conditions.
A person with work injury or work-related diseases preventing him from working is entitled: (i) a cash benefit equal to 75% of the insured’s average daily earnings that is payable until recovery or a determination of permanent disability, up to a maximum 180 days, and (ii) the reimbursement of medical and pharmaceutical fees.
If the insured person is totally and permanently disabled, he/she is entitled to 85% of his monthly wage. In 2006, a total of Rwf 23 million (USD 418,000) in benefits was paid to 3,561 beneficiaries. The average benefit paid was Rwf 6,559
Employers pay a compulsory contribution of 2% of each employee’s salary to the NSSF to finance Professional Risks Branch benefits. Although permitted under current law, there is currently no rate differentiation among various employers or economic sectors, which may present different levels of risk of worker injury and illness.
Employer contributions are allocated to an operational fund, a technical reserve and a security reserve that is invested by the NSSF. A 2003 actuarial study concluded that this branch is well-funded – and may be over funded. It is likely that benefit claims will decrease over time as workplace safety, working environments, and health and living standards improve.
Governance and Management
Governance and management are the same as discussed above with respect to the Pensions Branch. There is the need to ascertain the extent of injury and the extent to which the injury (or disability) persists, although similar determinations are made for payment of disability benefits in the Pensions Branch.
Maternity Benefits Protection
The Rwandan Labour Code provides for maternity-related benefits and protections for workers who are temporarily absence from work.
Coverage and benefits
The maternity benefits for workers provided under the Labour Code are consistent with the UN Convention on the Elimination of All Forms of Discrimination against Women and the ILO Maternity Protection Convention (ILO Convention number 183
Specifically, a pregnant employee is entitled to a paid leave of 12 weeks, of which two are obligatory before the presumed date of delivery and six are obligatory after delivery. A woman on maternity leave can extend the leave by an additional 6 months following medical certification of her inability to resume work.
During the maternity leave, a woman is entitled to receive 2/3 of her usual salary. A new draft Labour Code under consideration would make some changes to these rules, but largely leave them intact.
Employer pays maternity leave benefits a pay-as-you-go basis. The law states that the employer is required to fund maternity leave “until the setting up of a maternity branch.”
Medical Care Branch and Medical Insurances
The Rwandan medical care branch includes four distinct regimes for its public servants, the military, salaried (formal sector) employees, and the remaining population.
Coverage and Benefits
Public Servants and Military:
Rwanda’s medical insurance regime for public servants, which was established in 2001, protects its beneficiaries against the risks resulting from natural diseases, those which are caused by accidents and risks resulting from the pregnancy and childbirth and their consequences.
It is managed by La Rwandaise d’Assurance Maladie (RAMA). Military personnel are covered by a health insurance regime known as “Military Medical Insurance” (MMI), which is managed within the Ministry of defence.
Medical care for salaried employees in the private sector (formal sector) is ensured by their respective employers. Employers may choose to be affiliated with RAMA or contract with private insurance companies.
The general population, including those in rural areas and working in the informal sector, obtains medical care through mutual associations, a form of medical care and protection created by a the law nº 62/2007 of 30 December 2007.
A mandatory payment policy was instituted in 1996 and, as a result, the number of community-based health insurance programs grew quickly – from 6 in 1998 to 403 mutual health insurance programs in 2007. 85% of the Rwandan population is now covered by these insurance programs in 2008.
Insurance program members have access to all the services and medicines offered at the health centre and hospital levels, referred to as the minimum activity packet (“M.A.P.”) and the complementary activity packet (“C.A.P.”).
Coverage excludes prostheses and the aesthetical surgery.
For public servants, the contribution rate is 15% of the basic salary of which 7.5% is paid by the employer and 7.5% by the employee. For military personnel, the contribution rate is 22.5% of gross salary, of which 17.5% is paid by the government and 5% by each military staff. Mutual health care insurance programs are supported by household-based contributions.
The head of the household usually pays a collective contribution for all dependents equal to Rwf1.000 per household member. The cost paid by the insured himself is fixed at 10% of the total cost of health treatment provided to him.
Governance and Management
La Rwandaise d’Assurance Maladie “RAMA” reports to the Ministries of Finance and Social Affairs and Labour. It is administrated by a Board of Directors composed of members chosen according to their competences. Neither employers nor employees are represented on the board.
The mutual health insurance organizational structure follows the institutional framework established by decentralisation reforms and is comprised of committees at the district and village levels and a management committee at the Sector level.
Mutual health care insurance organisations enter into agreements with health service providers to provide health care to their members and then pay the providers in accordance with the agreements.
Branch by branch, this policy analyses issues and proposes recommendations for development in the areas of social coverage both in terms of population and in terms of branches; quality and level of benefits ; financing of different schemes and financial sustainability; management and governance; regulation and supervision ; legal framework and special incentives
Social Security Coverage
For pension and occupational hazards, only formal sector (+/- 6% of active population) is covered by the publicly managed scheme, while all other workers are excluded. It has so far been quite impossible to promote adhesion of informal sector with no stable income, no base for contribution, and no mechanism for collection of contributions.
Pension schemes proposed by insurance companies are quickly developing but are too new and too young to have yet a significant impact For health insurance, Rwanda has one of the best coverage with all workers in formal sector covered either through public or through private schemes; the rest of the population is estimated to be covered at 85% by the community based health mutual insurances.
However pensioners (obtaining benefits from NSSF) are not provided coverage under the insurance regime managed by RAMA and are required to rely on the mutual health care insurances, even though they were covered by RAMA during their working lives.
Additionally, certain groups of the Rwandan population continue to face financial constraints in obtaining access to medical care, despite the existence of mutual health care insurances.
Maternity leave and leave for sickness are currently covered by the employers who continue to pay the salary of the concerned employees with no counterpart in production.
The consequence is that in most cases employees are obliged to shorten their leave in order
to not lose their jobs, and most of the employers in private sector will practice de facto discrimination against young women.
Unemployment protection scheme is inexistent for very understandable reasons
Government will reinforce measures for total adhesion to pension schemes for all workers in formal sector, for self employed and for workers in informal sector in organized groups: mandatory adhesion to the First Pillar (defined benefit scheme), and Second Pillar (Provident Fund) for all workers in formal sector; mandatory adhesion with choice between Provident fund and any legally authorized private pension scheme for self-employed and workers in organized groups; government will reinforce measures for total adhesion for occupational hazards; Maternity leave and Sickness leave for all workers in formal sector.
Government will promote voluntarily adhesion to those schemes for salaried workers in organized groups by promoting the development of all kind of cooperatives especially Saccos, by providing attractive tax incentives, and by organizing intense education campaign and capacity building programs for the cooperatives; Government will make all required adjustment in legal framework.
Appropriate tax incentives will be provided for the development of private pension schemes
For voluntary schemes, intensive sensitization programs and appropriate incentives will promote adhesion of at least 70% for urban and rural informal sector, i.e. the portion of the population living above the poverty line.
For health care, the government will adopt soon and implement a new specific policy currently under preparation. This policy will propose all necessary measures to make universal coverage effective and financially sustainable.
Contributions, benefits and financial sustainability of existing systems
The SSFR assesses the adequacy of the current financing of the pension branch through valuations conducted periodically by an independent, professional actuary.
The 2003 actuarial report concluded that the contribution rate would need to be increased from 6% to between 8.0 and 9.5% during the 15-year period beginning in 2003 in order to maintain actuarial and fiscal equilibrium through 2018, and that a 17.7% contribution rate – 2.5 times greater than the current rate – would be required to pay all benefits and expenses over the next 50 years (to 2053).
The current situation of a generous benefit formula with a low contribution rate is sustained as long as Rwanda has a favorable demographic ratio but this situation is likely to be reversed as more workers will be retiring. Indeed, with the mandatory retirement age for civil servants put back to 65 years.
The SSFR has been so far capable to fund benefits up to 60% ( for those who contributed for 30 years) of the best last average salary ( which means a replacement rate of almost 100% of net take home salary if contributions are based on gross salary), with a contribution rate of only 6%.
This is sustainable only if the number of retired remains less than 1/10 of active workers, which is going to be reverted dramatically soon.
Even though the formula is generous, a low level of salaries combined with the lack of indexation mechanisms makes the purchasing power of the pensioners to be reduced day after day, and causes the SSFR to have a bad reputation of paying peanuts to its members.
Also the lack of ceiling in the solidarity mechanisms with large disparities in salaries causes an unacceptable situation of inequity where contributors with small salaries fund some big pensions for precisely those who used to be paid high salaries.
Studies have indicated the necessity of putting a ceiling in the base of contribution on the defined benefits scheme, the portion above the ceiling being a base to contribute in complementary defined contribution scheme.
The whole system remains in the classic coverage of “social risks”, with no pre-retirement benefits offered despite an urgent need to develop a scheme for housing and education.
The occupational hazards branch has no special issue regarding its funding and benefits provided. Regular actuarial valuation will provide guidance on any needed adjustments in the future. Current studies on health insurance policy will guide on policy recommendation for better benefits and corresponding funding mechanisms.
Parallel to efforts aimed at attaining the MDGs and the Vision 2020 objectives, it is crucial for Rwanda to develop a social security system which is inclusive, which is efficiently managed, and which contributes significantly to savings mobilization.
This policy defines guidance and highlights priority actions to be implemented in order to make “social security for all “a reality. Basing on the very positive recent experience in the development of mutual health insurance schemes, there is no doubt that objectives of this policy will be attained.