Many more small business owners in Kenya’s informal sector may have legitimate pension plans by the end of this year. According to the Retirements Benefits Authority (RBA) more than 32,000 Kenyans have already registered for the Mbao Pension Scheme.

RBA CEO, Edward Odundo reports that the scheme has shown significant improvement due to an increase in public awareness about saving among players in the country’s informal sector.

The project reported a growth of 149% to 32,000 subscribers in June 2012 up from 13,000 in January 2012.

The Pension Scheme, which targets members of the informal sector, was developed by the National Federation of Kenya Jua Kali Associations and the RBA. It encourages low income earners to save KES 20 a day which, over a certain period of time, translates to a reliable income after their retirement.

It is a voluntary pension plan that enables players in the informal sector to access protection mechanisms without having to register under a formal employer. According to the RBA, members are not taxed should they choose to withdraw their funds. However, there is a penalty fee for early withdrawal. Members are also entitled to an interest rate of at least 7%.

The Mbao Plan is supported by the Co-operative Bank Trust, Kenya Commercial Bank, Insurers Brokers Kenya Ltd, RBA, Airtel Money and M-Pesa.