KENYANS SHOULD INCULCATE A SAVINGS CULTURE FOR THE COUNTRY TO REALISE ECONOMIC GROWTH

By Raphael Lekolool

In a world where people are not often reminded to save their money, it is easy to overlook the value of savings and investments. With so many other instant gratification financial options available, why would anyone be convinced to save for an unknown future?

The truth is that saving is a powerful tool for an individual’s and a country’s economic transformation—especially in countries like our very own where the population has a low savings culture.

For years, Kenya has struggled with poor savings rates and high levels of reliance on foreign aid, which has led to significant social and economic challenges.

 As observed from various studies, Kenya’s savings rate is way below Africa’s average of 17 per cent. The likes of Uganda and Tanzania have already crossed the 20 percent mark signifying a more advanced savings culture.

It can be argued that Kenya’s low savings culture stems from several factors including: poverty; inadequate financial education towards saving; and a limited range of available financial incentives. This has made it difficult for Kenyans to build up their savings over time and allow them to save more money in the long run.

The current national discourse on saving and investing influenced by President William Ruto’s remarks made in various occasions in the recent past is a welcome conversation. The President has emphasized on the need for Kenyans to embrace a culture of saving as part of efforts to improve the country’s economic situation.

One of the discussions sparked by the President is on pension contributions by Kenyans in formal employment, which he notes is insufficient to be of help to retirees in old age. I could not agree more.

Currently, employees contribute a minimum of Sh200 monthly, which is usually matched by an equal contribution from their employers, translating to a maximum of Sh2,400 annually. This is far from enough for most people in Kenya who need more to live comfortably during retirement. In addition, the pension scheme only serves people in formal employment leaving out a vast majority of Kenyans who work in informal sectors.

Nonetheless, all hope is not lost. As the Government and relevant sector players combine efforts to enhance and boost national savings, Kenyans looking to start their savings journey have a variety of savings products to choose from.

Financial institutions such as Banks and Saccos have numerous savings products that cater to different saving needs and goals. Saving products across the market have different interest rates and the interests are payable either monthly, quarterly, twice a year or once a year. Some savings accounts require as little as 50 shillings deposits to start earning interest with varying withdrawal limits

This simply means that the savings products portfolio in Kenya is diversified enough to cater for everyone, both in the formal and informal sectors.

So what needs to be done to encourage people to save more? The government needs to develop broad policies that cover on other savings instruments besides social security that will provide financial security and promote savings in the long run. The Government’s plan to match pension savings by a shilling for every two shillings set aside should be broadened to also cover other savings incentives. This will help improve Kenya’s economic situation because it would mean more money will be available for investment, which would lead to more jobs being created.

At Postbank, we have endeavoured to provide low-cost savings accounts for the average Kenyans with a view to advancing financial inclusion in Kenya. We have also advanced financial literacy activities with all the customer segments that we work with. As the largest and oldest savings bank whose mandate is to inculcate a savings culture, the Bank has a  diversified personal and group savings products portfolio that offer interest income that is not taxed.  The Bank is geared up to support Kenya’s savings transformation journey.

As the country’s top leadership looks to change the perception on saving and inculcate a savings culture into its people, there can only be one way forward: increasing public awareness through education—not just over what they need to save but also how they can do so effectively by making informed decisions about their finances through various incentives.

The onus lies on Kenyans themselves—and not just those who are already financially literate—to save responsibly so that they can contribute towards their own financial stability in an economy that is growing at an unprecedented rate.

The writer is the Kenya Post Office Savings Bank (Postbank) Managing Director