Businesses & Financial News

Firm attributes Kenyans’ poor saving culture to over-Indebtedness

By Seth Emmanuel

Overselling of loans, or over-Indebtedness has been attributed to the country’s poor savings culture – currently capped at just 12 percent.

The Chief executive of Maisha Microfinance Ireneus Gichana in a media briefing yesterday, notes that the country’s financial market is heavily focused on borrowing as opposed to saving  – a habit he believes is a time ticking bomb.

“High savings and investment have fueled the economic boom. China is an extreme case, with more than half of what is produced being saved and then invested,” Gichana said during the launch of a fixed deposits product dubbed M-Fanisi.

Savings ratios improved in Kenya from 5.4 percent in 2019 to 12 percent in 2020 and are projected to trend around there in 2021, compared to savings ratios in China at 45.7 percent, India 31.4 percent, as well as Uganda and Tanzania Savings rates which have already crossed the 20 percent mark.

“This is why we have launched M-Fanisi, a mobile-based fixed deposits savings product with the highest return in the market at 11.25 percent per annum compared to the current 6 to 8 percent per annum ordered by the Bank’s contemporaries. With M-Fanisi Kenyans can open a fixed deposit account with as little as Sh500 from the convenience of their phones,” he said.

The move comes even as fixed bank deposits held by Kenyans hit a historic high as  CBK data shows fixed deposit accounts gained Sh64.8 billion in the quarter ending June, translating to an increase of about Sh720 million every day in the period.

Figures by the Central Bank of Kenya (CBK) Financial Sector Stability Report 2020 indicates that total deposits in the microfinance banks increased by 12.3 percent from Sh43.9 billion as of December 2019 to Sh49.3 billion in December 2020.

The growth was supported by the aggressive use of digital platforms to mobilize deposits.

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