- Today, 16.1 per cent of the country's population is surviving on $1.9 or Sh235 per day.
- The financial health of the adult population deteriorated by five per cent percentage points in the two years under review to 17%
Poor financial planning amongst families in Kenya could push the number of those living below the poverty line to 17 per cent by 2033.
Currently, 16.1 per cent of the country's population survives on $1.9 or Sh235 per day.
The latest study by continental financial service firm, EFG Hermes ranks Kenya’s saving rate at 12 per cent, considerably lower than Africa’s 17 per cent average, with a per capita income of $1,838.
Saving in neighbouring Uganda and Tanzania stand at over 20 percent, even though their per capita incomes are significantly lower at $817 and $1,076, respectively.
The study however projects the country's saving culture to rise by at least three per cent in the coming decade, thereby lowering the number of those in poverty due to the robust economy and sound financial habits adopted by Generation Z.
"Although Kenya has achieved considerably in financial revolution, especially on credit access, stakeholders must now shift focus on financial literacy,'' the financial service firm says.
Financial illiteracy is likely to negate gains made against poverty in the country even as the economy emerges from the ravages of Covid-19.
According to World Bank, nearly half a million Kenyans were lifted out of extreme poverty last year as the country bounced back from the Covid-19 crisis that pushed 1.2 million to live below the poverty line.
The global lender's macro poverty outlook estimates the country’s extremely poor, who live below $1.9 (Sh220) a day, reduced from 19.2 million or 35.7 per cent of the population in 2020 to 18.8 million or 34.3 percent in 2021.
It projects Kenyans living below the poverty line will fall further this year as the economy recovers.
Just like EFG Hermes, the lender is worried that wealth generation, growth of family businesses and personal financial management will drop if financial institutions promote consumerism more than discipline.
"While the country has made good progress in terms of fintech, most of the innovation promotes consumerism than financial planning and discipline. This can only lead to more people sliding into poverty," notes the report.
Central Bank of Kenya shows that despite the impact of the Covid-19 pandemic, financial inclusion expanded to 84 per cent in 2021 from 83 per cent in 2019. Financial inclusion in the 2006 baseline survey stood at a paltry 27 per cent.
While financial inclusivity rose, worryingly, the financial health of the adult population deteriorated by five per cent percentage points in the two years under review to 17 per cent.
According to the Competition Authority of Kenya (CAK), this is perhaps attributable to the fact that a majority of digital loans are for consumption purposes and that many borrowers take out multiple loans that have high interest and penalisation rates.
"The result is that thousands of borrowers default and, in some cases, are subjected to unconscionable debt collection tactics,'' CAK said in a statement promoting financial literacy last year.
To seal this gap, several financial firms are coming up with both digital borrowing and saving products to strike the balance.
Vehicle financing company MOGO has launched a financial literacy tool aimed at educating its Kenyan clients about personal budget planning and making informed financial decisions.
Last year, a digital lending app, Tala launched Enlighten, a mobile learning platform that provides customers with financial advice to help them navigate everyday financial challenges.
Safaricom's M -Shwari and lock saving plan introduced in 2019 are dealing with the saving culture crusade in the country.
Last year, customers saved Sh32 billion on NCBA mobile account, M-Shwari, and used it to borrow nearly three times the amount.