Every CEO knows that when you want to improve performance, you track and reward. Every mother knows this as well, you have kids and you want them to wash their dishes, you could threaten them with “no TV until plates are washed”, and they will reluctantly do it. However, if you offer them N10 for every plate they wash – that can be used to buy sweets, they will be motivated to go beyond washing only their own plates, but yours as well.
This simple concept that humans are driven by rewards is the basis for incentive programs in the workplace and marketplace. Airlines offer miles program, where you earn a reward for spending your money to fly with them. Some employers will offer you club membership if you stay with the company for a length of time; thus, rewarding your length of service and taking advantage of your experience. Businesses are happy to invest in these “reward” programs because they create brand loyalty, retain customers, and even create referrals.
The incentive theory is a major theory of motivation. The theory of motivation essentially states that “human behavior is motivated by a desire for reinforcements or incentives.” The incentive theory states that “The greater the perceived rewards, the more strongly people are motivated to pursue those reinforcements.”
Governments have recognized the positive benefits of reward programs, and have sought to reward their citizens for performing certain actions. For example, in Brazil, there is a social welfare program called the Bolsa Familia, which provides aid to poor Brazilian families, but what is unique is that the scheme only pays benefits if the children attend school and are vaccinated.
In this case, the Brazilian Government is seeking to track educational attainment and reward it. If kids from poor families do not attend school, the direct cash payments stop, if they attend and get vaccinated, then each family gets $34 per month. The Government is offering a reward of 17% of the minimum wage as an incentive to motivate and reward poor Brazilians to get children vaccinated and educated.
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In Nigeria’s Kebbi State, The World Bank’s Africa Gender Innovation Lab, in collaboration with Catholic Relief Services (CRS) conducted a study on cash transfers. It found that “cash transfers offered to women from ultra-poor households in Northwest Nigeria have an immediate positive impact on household consumption, as well as female employment and well-being”
Nigeria should experiment with opening up the RSA and Health Savings to all Nigerians irrespective of age or occupation as a policy to reduce infant mortality, promote a saving culture, and create a pool of long term savings in Nigeria.
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Imagine if every child born in Nigeria received a one-time deposit of N100,000 into his Retirement Savings Account from the Federation, provided that by the 5th year, the child has been enrolled into a primary school and has taken all immunizations; and the one time Federation contribution cannot be accessed until the child retires or reached the age of 65 -whichever is later.
This account balance can be transferred to a Nigerian Housing Fund where it can also be accessed if the owner seeks to make a one-time payment for a first-time home purchase. Funds can also go to an education fund and the account owner can continue to make contributions during his working life – tax-deferred.
Clearly, this scheme would incentivize primary enrollment and immunization, and we know there is a direct correlation with education, maternal health, and family income – especially for the girl child. Most importantly, this will create a savings culture for the parents, the children; and in the long term, reduces the societal burden of paying pensions. The tax-exempt status will also allow savings to grow uninterrupted for 18 years minimum – compounding those returns.
The maths is good. If the Federation invested only N100,000 per child and contributed nothing for 65 years, at a very low rate of 2% per year – the return in 65 years (using compound interest) will be N262,252.32. However, if the parents invested just N100 a month (N1200/year) to this same account at the same rate, the payout in 65 years will be a total of N265,399.35.
Remember this is at a 2% annualized rate, what happens if parents contribute N500 a month at say 5%? It is definitely worth considering.