The proportion of financially stable Kenyans has more than halved in the past five years amid runaway cost of living and stagnant pay, a new household survey shows.
Latest findings of the Financial Access (FinAccess) Household survey show that the share of adults with high levels of financial health to enable them to afford their day-to-day financial needs, deal with emergencies and invest in future goals – technically called top wealth quintile – shrank to 15 percent last year from 40 percent.
The household survey, conducted by the Central Bank of Kenya, the Kenya National Bureau of Statistics and the Financial Sector Deepening Trust – Kenya (FSD Kenya), links the growing share of wealthy families struggling with financial needs to difficulties related to aftermath of the Covid shocks, which disrupted supply chains.
The report dated November 2022 says reduced demand for services from social isolation and layoffs affected business owners and employees who are over-represented in the top wealth quintile.
A drop in the proportion of financially stable Kenyans means that now fewer Kenyans are carrying a bigger burden of supporting a bigger population of their poorer relatives.
The rising cost of living in absence of a considerable rise in pay has meant that workers have to tighten their belts by cutting down on non-essential expenditures.
Most employers have in the past adjusted pay to compensate for annual growth in inflation, but KNBS’ Economic Survey suggests they are no longer keeping pace with growth in prices of goods and services.
“Financial health has declined not just among the poor but also among wealthier groups,” the FinAccess report says.
“In 2016, for every adult that said their financial life had worsened in the past year, there was one adult that said it had improved. By 2021, this ratio was over nine to one.”
A financially healthy person is one who comfortably manages short-term financial obligations and consumption needs, absorb cash shocks like medical emergencies and stays on course to meet long-term investment needs such as buying a home and securing retirement income.
The survey says agriculturally-rich Trans Nzoia County has the largest share of families which are financially healthy, beating Nairobi and counties around the capital such as Kiambu.
About 37 percent of adults in Trans Nzoia are able to meet current and future needs as well as emergencies followed by Nairobi (35.3 percent), Kiambu (29.9 percent), Kirinyaga (29.5 percent) and Kajiado (27.7 percent).
“Analysis of consumers’ life priorities and financial needs and how financial services are used to meet these needs and support their livelihoods for improved well-being at the county level reveals interesting outcomes about the impact dimension of financial inclusion,” the survey states.
“Counties with the highest population that is formally included [financially], recorded the largest proportion of adults that are categorised as financially healthy.”
Garissa has the lowest share of those classified as financially healthy at 2.4 percent followed by Tana River (2.5 percent), Marsabit (3.2 percent), Kwale (4.9 percent) and Turkana (6.1 percent).
The proportion of financially stable households in the city counties of Mombasa, Kisumu and Nakuru is 14.4, 15.7and 16.9 percent, respectively, while Nyeri’s and Uasin Gishu’s are at 26.8 and 10.7 percent, respectively.
The report paints a picture of a country where more than three-quarters of families are living from hand to mouth. President William Ruto, who took office mid-September, has pledged to improve the standards of living among economically underprivileged groups through what he calls the “bottom-up economic model.”
The President says implementation of his economic blueprint, including Sh50 billion “Husters’ Fund” per year for small businesses and start-ups, will lift millions out of biting poverty by creating jobs for the unemployed.
“Bottom-up is anchored on deliberately promoting investment and financial instruments targeting the millions who are unemployed, hustler enterprises, and the farmer groups,” Dr Ruto said in an earlier statement.
The rollout of the Hustlers’ Fund, which will offer loans priced at single-digit interest rates and disbursed digitally, is scheduled for early next month.
“The Husters’ Fund is an instrument to correct market failures at the bottom of the pyramid,” Njuguna Ndung’u, the Treasury Cabinet Secretary, said on Friday.
“Most of the time we start financial products to address needs at the bottom of the pyramid but what happens is that the product leaves and moves on to the next level… but the intention should be that people are the ones to move upwards, not the product.”
