August 2nd, 2020

Managing your money broadly means deciding how much to set aside for the future and how much to keep handy for short term uses. Of course, the actual dynamics are more complex (for example, how people save is laden with social meaning, influenced by psychology and subject to cognitive biases). Some have more money to manage than others and some are more focused on managing the money they don’t have by cultivating sources of liquidity, or earning more income through a side business or an odd job to bridge a cash shortfall. Yet, most people at some point have a need to store the funds they don’t use immediately for safekeeping. In Kenya, how do people meet this need

This chart of the week explores how many adults save, why the save and who they save with, with a focus on customers of commercial banks. The chart divides up Kenya’s population into mutually exclusive groups of adults (over the age of 18) defined by whether, why and how they save. Partitioning the data in this way creates a more expansive map of the savings landscape that helps us to explore general patterns of savings in the population and identify distinct segments within those patterns.

Overall, 81 percent of Kenyans report using a financial instrument (formal or informal) to save or store money. Just under 1 in 2 savers, report that they primarily save to invest in productive assets (such as land, livestock, agricultural machinery or inputs),to start or expanding a business or to pay for education. Commercial banks serve about 47% of these – we might call them – ‘future-oriented’ savers. About 1 in 5 of savers, primarily save for day to day needs (think for regular expenses like food, transportation, airtime). Of these savers, perhaps who place a premium on having liquid stores of value, 34% use commercial banks. A further 1 in 5, primarily save for emergencies, these might be particularly risk averse individuals who want to make sure they have funds to cover them in case a child gets sick, for example. Commercial banks serve about 43% of these savers.

If banks were to ask themselves, “what kinds of customers are we most or least effective at reaching from a ‘savings motivation’ point of view?” the answers suggested by the data might be: those adults who are relatively more future oriented, who perhaps have larger investible sums saved up and who are looking to distance themselves from their funds in ways that putting money in a mobile money wallet or under the mattress simply cannot do. Banks seem to be least effective at reaching individuals who are primarily worried about having emergency funds, perhaps because those funds become too illiquid. It will be interesting to see whether the advent of mobile banking changes this picture.

Individuals don’t just have one reason they save, however. The fact that over 90% of commercial bank users also use other types of savings instruments, suggests that these users seek out other kinds of services to meet different kinds of savings needs. In the chart, this can be seen by the large numbers of yellow lines fanning out from the “Traditional banking” and “Mobile banking” bars in the 4th column to other types of services in the 5th and 6th column. Savers that use commercial banks use an average of 2.2 additional savings providers. Just over 1 in 3 commercial bank savers, use a secret hiding place for cash.

So the savings story is indeed complex and multifaceted, but hopefully this chart gives a more complete picture of where commercial banks stand in the overall marketplace for savings.

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