Instilling a savings culture in Kenya

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 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 ours.

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

As observed in various studies, Kenya’s savings rate is way below Africa’s average of 17 percent. 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, and a limited range of available financial incentives. This has made it difficult for Kenyans to build up their savings over time.

The current national conversation on saving and investing inspired by President William Ruto's campaign is welcome. The President has emphasised the need for Kenyans to embrace a culture of saving as part of efforts to improve the country's economic situation.

He has also weighed in on pension contributions by Kenyans in formal employment, noting they are insufficient to be of help to retirees in old age. I could not agree more.

Currently, employees contribute a minimum of Sh200 monthly to the National Social Security Fund, 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 other sector players combine efforts to 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 Sh50 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 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, for example, we have endeavoured to provide low-cost savings accounts for the average Kenyans with a view to advancing financial inclusion in the country. We also have 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 mindsets and inculcate a savings culture, there is need for increasing public awareness and education— on what they need to save, how they can do so effectively and the various incentives that come with doing so.

The onus also 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.