Role of social security fund scheme in enhancing the socio-economic development of Rwanda.

LIST OF GRAPHS

Graph 4.1: Trends on how benefits 20

Graph 2: Different Types Of Benefits Paid 21

Graph 3: Trend Of Contribution From 2003-2008 22

Graph 4. Comparison On How Benefits Are Allocated 39

CHAPTER ONE

INTRODUCTION

1.1. Background to the study

Social security is one of America's most successful government programs. It has helped millions of Americans avoid poverty in old age, upon becoming disabled, or after the death of a family wage earner. Social security is one of the greatest achievements of the American government and one of the deepest commitments to the American people said President Bush (Peter A, Diamond &Peter R. Orszag, 2004:1). Social security has the economic benefit of correcting market failure, in that the private sector is unable alone to redistribute income, to alleviate poverty, and to promote social welfare and stability of the population and promote investment. But there may be also negative consequence of social security including roles on labour markets and savings (E. PHLIP DAVIS, 2004; p.18). Social security pensions are also subject to political risk, that benefit promises will be reneged upon. This study covers the contributions of the SSFR toward the socio-economic development of RWANDA and the population in large. Where by Socio-economic Development means ''improvement in a country's economic and social conditions''. More specifically, it refers to improvements in ways of managing an area's natural and human resources in order to create wealth and improve people's live. Geographers often compare levels of development between different countries or regions and the people who live in them - talking about more economically-developed countries and less economically-developed countries. Development is considered in terms of either economic or human development, and ways of measuring development are called development indicators.

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Clearly, RWANDA is an example of a country that has suffered the most devastating roles of bad governance. However, after the 1994 genocide there has been an emphasis on creating more accountable and transparent systems, which need further support.

Communities have the right to decide how to utilize small amounts of resources using participatory planning approaches. In addition, the government of RWANDA has significantly developed its public finance systems in order to monitor, execute, and audit spending programs. The money is used differently according to the needs of the population to satisfy their basic needs such as health, education and infrastructure.

Social security development is one of the measures that have been adopted by developing countries including RWANDA to overcome poverty related challenges. The relevancy of social security in promoting economic growth and poverty reduction stems from its roles in saving mobilization, capital market development and income redistribution. According to monetary studies reveal that if social security is considered in socio-economic and poverty reduction programs, significant progress can be made in improving standards of living in the developing world.  Owing to this noble role in poverty reduction and economic development, social security reforms are being undertaken in different parts of the world to align social security systems and programs to economic growth and development. The ultimate objective is to develop a social security system that responds to country needs and priorities.  For the last 15 years, RWANDA's economic development has been a success story to many in the region with tremendous developments in all sectors of the economy. Though this rapid economic transformation can be attributed to many factors, the Social Security Fund of RWANDA (SSFR) played a significant role.

It is this central place of social security in the country's socio-economic progress that has prompted the government to improve social security administration and systems by conducting reforms. The administrative reform introduced the merging of existing social security institutions into one national body while social security system reform introduced the provident fund. While there is a general appreciation of the role of RWANDA's social security scheme in the country's on-going economic transformation, no study has been conducted to quantitatively illustrate the contributions of the scheme to Rwandan economy. This article is therefore intended to demonstrate how the Social Security Fund of RWANDA has contributed to the development of RWANDA's economy, hence justifying the aforementioned attempt by developing countries to develop social security as a strategy of achieving accelerated socio-economic progress.

Before discussing the aforesaid roles, it is important at this stage to briefly describe the Social Security Fund of RWANDA. The Social Security Fund of RWANDA (Peter A, Diamond &Peter R. Orszag, 2004:1), hereinafter referred to as the Fund is a public institution created in 1962 to administer two branches of pension and occupational risks. Its principle functions are; to collect contributions from members, pay benefits to qualifying members and productively invest the surplus. The contribution rates, according to existing legislation are 6% for pension branch and 2% for occupational risks. These employee savings constitute a pool of resources the Fund has used to significantly contribute to RWANDA's economic recovery as expounded in the section that follows.

The Law n° 60/2008 of 10/09/2008 determining the responsibilities, organization and functioning of RWANDA social Security fund of RWANDA, Article 3 relating to the responsibilities of the SSFR indicates that SSFR has responsibilities of assessing and collecting pension contributions from both the employers and employees; Distributing benefits to pensioners, invalids and/or their beneficiaries; Investing the excess revenues in the most responsible manner to ensure that the funds grows and contributes to economic growth of the country; Mobilizing long-term savings; Gathering appropriate statistics necessary to facilitate the planning and implementation of the above mentioned core functions. (Guide of insurers 2002, p.8).