BusinessPeople Daily

Be deliberate about embracing a savings culture

Diana Muriuki

Recent statistics that place Kenya well below her neighbours in terms of gross national savings — the percentage of produce in monetary terms that is set aside for future use or investment — is something that should worry us.

International Monetary Fund (IMF) statistics from 2016 indicate that Kenya’s gross national savings is around 12.7 per cent, which is below the average of 14.7 per cent for similar-sized economies in Africa.

Tanzania, Uganda and Rwanda have gross national savings rate of about 21.9 per cent, 16.9 per cent and 12.9 per cent respectively while South Africa is at 16.3 per cent, Ghana 16.1 per cent.

Statistics also indicate that around 99.9 per cent of bank accounts in Kenya have less than Sh1 million in savings and 0.7 per cent have deposits of more than Sh1 million. Why is the measurement on savings important?

It is important because the higher the savings rate, the higher the possibility for new investments. Low savings means the number of new indigenous investments remain low.

Low savings rate also means that we are living on the edge having zero access to funds in the event of an emergency or to invest when an opportunity arises.

Lacking that cushion is source of constant stress which leads to a host of problems such as depression, heart conditions and suicide.

To reverse the trend, we ought not to spend all your earnings. Reduce expenditure and set aside savings for investments and emergencies.

Developing a savings culture is a hurdle for many. One has to earn enough to put some money aside. We must address the issue of unemployment that is affecting many of our youth.

Statistics show that up to 45 per cent of the youth who account for up to 70 per cent of the population are either unemployed or underemployed. This combined with the high costs of basic commodities means savings are unattainable.

For those in debt take conscious measures to lighten the debt servicing process. Nationally, there are a number of things that we must also do.

First, we must address the high levels of unemployment. Secondly, we must come up with policies that actively encourage people to save for example tax exemptions.

We need to remove bottlenecks that make it harder for small and medium enterprises to thrive. As a country we must make it easier and cheaper to register and operate new businesses. Bottlenecks such as those around infrastructure, access to credit and high energy costs must be reviewed.

Studies have also shown that people tend to save when they trust the institutions that they save in. To this end, it is important that we ensure that the savings outfits are credible and trustworthy. Financial institutions should also innovate ways to encourage savings from the populace. – The writer is the CEO Institute of Certified Investment and Financial analysts

Show More

Related Articles