Kenya’s gross national savings as a percentage of its output are tipped to lag behind the sub-Saharan Africa average in the medium term as easy access to cash through mobile platforms continues to discourage savings.
A rising cost of living and growing consumption-first culture are also to blame for the low savings levels, experts say. Easy mobile loans have encouraged a consumption culture, and gambling.
However, data compiled by the International Monetary Fund (IMF) projects a recovery of the savings level from an estimated 11.8 percent of gross domestic product (GDP) in 2018 to the 14 to 15 percent range in the next five years. This is still below the projected average of 17-18.5 percent for sub-Sahara Africa over the same period.
The latest actual savings figures from the Treasury are for 2017, when the ratio stood at 11.2 percent of GDP.
Equity Bank chief executive James Mwangi attributed the low savings culture to the growth in fintech and telco money, which has significantly moved the bulk of the population from savings accounts in saccos and banks to mobile wallets.
“People rarely want to save in a mobile wallet, which is a transactional platform, and which is not covered by deposit insurance. People are also aware of the risk of technology because of the risk of cyber fraud and do not want to keep a lot of money in these wallets,” said Mr Mwangi.
“What we need is to merge people’s accounts with their mobile wallets, so that their deposits can be held in a safe and secure place where they are covered by deposit insurance, and in addition to that they are also incentivised to save because they can earn interest.”
Savings have also been adversely hit by job losses in the private sector, forcing affected people to raid their nest egg to make ends meet amidst rising cost of living.