June 12th, 2023

According to FinAccess, Kenyans are saving more than they are taking loans, and the rate of saving has been growing over the years. Most savings are formal and driven by saving in mobile money wallets.

Although the gap is not significant, men are saving more than women. In 2021, 75% of men were saving, compared to 73% of women.

When examining financial literacy levels, as measured by the FinAccess metric (“Suppose you take a loan of KSh 10,000 with an interest rate of 10 percent per year. How much more money would you have to pay at the end of the year? If answered correctly, financially literate”), there seems to be a positive correlation between financial literacy and certain key demographics. For instance, individuals with higher education levels (tertiary level) and those in the working class (26-45 years old) have higher formal savings and greater financial literacy.

However, this trend does not hold true for other demographics, such as the county level. Bomet, which has the highest financial literacy levels at 70% of adults, does not have a correspondingly high formal savings rate, standing at 62.5%. On the other hand, Nyeri and Murang’a have the highest formal savings rates in the country, at 83.7% and 81.5% respectively, but their financial literacy rates are not as high, at 49.9% and 30.6% respectively.

There are various reasons why people save, and this is primarily for day-to-day expenses, emergencies, and education. Savings also play a critical role in businesses as a source of start-up capital and for day-to-day operations. Therefore, whether one is financially literate (as defined by the metric used in FinAccess) or not, the need to set aside money for specific reasons is evident among Kenyans.

The choice of device for savings is driven by its security and convenience. It’s worth noting that a key barrier to saving is a lack of income, which may explain why the youth below 25 years old have high levels of financial literacy but low levels of formal savings.

FSD Kenya presented these insights during the launch of the Banking Industry Financial Literacy Campaign 2023 spearheaded by the Kenya Bankers Association, the Central Bank of Kenya and other sector players.

More data and details in this slide deck. 

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