Savings culture can help to grow Kenya’s economy

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, why would one need to save for an unknown future?

The truth is, saving is a powerful tool for an individual and country’s economic transformation—especially in countries like ours, 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, the savings rate is way below Africa’s average of 17 per cent.

The likes of neighbouring Uganda and Tanzania have already crossed the 20 per cent mark.

Low savings culture

The low savings culture arguably stems from factors such as poverty, inadequate financial education towards saving and a limited range of available financial incentives.

This has made it difficult for Kenyans to build their savings over time.

The current national discourse on saving and investing influenced by President William Ruto’s recent remarks on several occasions is a welcome conversation.

The President has emphasized a savings culture in a bid to improve the economy.

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

Employees contribute a minimum of Sh200 monthly, which is usually matched by an equal contribution by their employers, translating to a maximum of Sh2,400 yearly.

This is far from enough for most Kenyans to live comfortably in retirement. In addition, the pension scheme only serves people in formal employment, leaving out a vast majority of Kenyans who work in the informal sector.

But 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 products to choose from.

Financial institutions such as banks and Saccos have numerous savings products that cater to different saving needs and goals at different interest rates.

The interest is payable regularly. Some savings accounts require as little as a Sh50 deposit to start earning interest with varying withdrawal limits

That simply means the savings products portfolio in Kenya is diverse enough to cater for everyone.

So what needs to be done to encourage people to save more?

The government ought to develop broad policies, which 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 saved should be broadened to also cover other savings incentives.

That will help to improve the economic situation as more money will be available for investment, hence the creation of jobs.

The onus is on Kenyans—and not just the financially literate—to save responsibly so that they can contribute towards their financial stability in an economy that is growing at an unprecedented rate.

Mr Lekolool is managing director, Kenya Post Office Savings Bank (Postbank). [email protected].