FXPesa: Driving a financial literacy revolution in Africa

Alan Greenspan, a former US Federal Reserve Chair, once remarked: “The number one problem in today's generation and economy is the lack of financial literacy.” Whilst he was predominantly centring this on the United States, the statement is certainly true for Africa too.

If there is to be a marked improvement in the financial futures of Kenyans and a stop to the scams that keep affecting thousands, financial literacy rates must be improved.

Financial literacy has many definitions, but a widely used one is from Standard & Poor (S&P), who in their Global Financial Literacy Survey, define it as the ability to “understand essential financial concepts in making informed decisions about saving, investing and borrowing”. This survey went across the world and found rates of financial understanding in Africa to be alarmingly low. Questions were asked around topics such as diversification of risk, calculating interest repayments and knowledge of transaction costs. Percentages of correct answers (literacy rates) were captured for each country.

The finding showed that while many European countries, for example, had literacy rates of circa 65-75 percent, many African countries fell well below, such as South Africa (42 percent), Tanzania (40 percent), Kenya (38 percent) and Nigeria (26 percent). This is a profound issue, as it shows most of these populations are not able to navigate their financial lives effectively and are certainly not planning their retirements to any real extent.

Indeed, in Kenya, it is noted that 70 percent of the population enter retirement with less than $10,000. The education system is letting people down. These topics are never taught in schools.

Opportunity in the growing mobile phone penetration

It is fortunate that although schools are letting their pupils down, they can still access education through the internet. The number of people that will have access to mobile phones over the coming years will increase at a phenomenal rate across Sub-Saharan Africa particularly. Unique mobile subscribers will increase from 477 million in 2019, to 614 million by 2025. Of these users, a huge 475 million will have internet access through their smart phone by 2025. This is so important, as it allows people of all backgrounds and genders to seek information, education and fintech organisations to help them understand how to save and invest. It is the hope that with more people understanding finance, there will be less opportunities for scammers.

Scams and pyramid schemes

On August 12, 2021, the Capital Markets Authority (CMA) released a “Cautionary Statement” advising the public not to give their funds to a company that was “promising a return of 400 percent in six hours”.

There are many that would struggle to understand why anyone would believe in such an obviously exaggerated claim. As they say, the only person who gets rich off a get-rich-scheme is the one selling it. But we must look at the way society has developed in recent years to truly understand it.

We live in a world where if you want something delivered, it should be done same day or next day. If you want to go on a date, you swipe an app. If you want a taxi, it should be there in minutes. The list goes on. We live in a world of instant gratification.

The truth about wealth creation, in my experience, is that it takes many years of understanding and patience with oneself. Many people now don’t want to hear this, instead believing that an influencer sitting on a Lamborghini could be them in a week. All they must do is keep getting 400 percent return every six hours. Of course, they never get the returns and the people running the scams take another victim. Improving financial literacy rates will decrease the number of times we see this pattern occurring.

Financial literacy revolution

At Equiti Group’s EGM Securities (FXPesa), we are determined to help change the tide. It is our mission to help the financial futures of one million Kenyans in the next three years.

How will we be successful in this mission?

We are supplying education content daily. We have rolling webinars, seminars and workshops. We speak to our huge army of clients through our social media channels throughout the day. We create videos for sharing on YouTube, send SMS and emails. We talk on radio and national TV. We give practice accounts with virtual funds so that clients can practice what they’ve learnt. We are relentless and that’s how we are successful in this. Simply, we will not stop.

Join us on this ‘Financial Literacy Revolution’, whether you are experienced or brand new to investing. Let’s make a difference together.

Follow the writer, Brian, @brian_equiti