Dreams that do not come true: re-addressing social security to expand old-age social protection: the case of informal workers in El Salvador

Dreams that do not come true: re-addressing social security to expand old-age social protection: the case of informal workers in El Salvador

Alternative pension schemes for informal workers in El Salvador

This paper explores obstacles and opportunities to expand social protection for informal workers in El Salvador.

It rules out the short-term possibility that old-age social protection in El Salvador will be expanded through social security measures. Workers are entitled to pension only if they fulfil certain minimum requirements that are out of reach for the majority.

Instead, micro-finance institutions (MFIs) are proposed as an alternative to social protection. This is in part because the MFIs have taken the initiative to start a dialogue on micro-pensions. A few issues however have to be taken into consideration. The most important one is the lack of experience that MFIs in El Salvador have in managing savings, since they have focused more on micro-credit. Capturing savings requires institutions to be regulated and to incorporate additional functions in order to perform and operate with minimum risks to deposits. Moreover, earning trust to get credit is not equivalent to earning trust to capture savings.