Kenya's saving culture: how pension members save and invest

Why we did this study

Higher saving helps an economy like Kenya's grow, and saving and investing more is how people secure their retirement. Yet a 2021 study cited in our report put Kenya's saving rate at 12 per cent, below the African average of 17 per cent. Uganda and Tanzania have recorded rates of over 20 per cent.

Access to financial services has grown a great deal, but the rate of saving remains worrying. Not every worker has an employer-backed retirement scheme, and what people save through one may not be enough in retirement.

For this seventh edition of Enwealth Conversations, our social security study group with Strathmore University set out to understand how people save and invest, what shapes those habits, and how a better saving culture could be built. We asked members of pension schemes why they save, where they save and what gets in the way.

What we found: the will to save is there

Most of the members we surveyed do save. 87% said they regularly put part of their income into savings and investments, 82% agreed that they have always tried to save, and 71% said they would consider saving more.

The amounts are modest. Among regular savers, the most common rate was 6% to 15% of monthly income, and 21% saved less than 5%. Our report finds that most save less than 15% of their income, below the recommended minimum of 20%. Those who earned more tended to save a larger share.

People save mainly for big purchases and projects, for retirement, and for unforeseen costs such as medical bills. SACCOs were the most popular place to save, followed by pensions through an employer, then chamas and table banking, then bank savings accounts and money market funds.

Over the past year, 48% saved money every month and 43% saved for a long-term goal such as a car, education or a big project. Fewer have a safety net: only 37% had started or kept up an emergency fund. As our report puts it, people are saving for long-term projects, including education, rather than for retirement.

What we found: what holds saving back

Not having enough money was the barrier named most often, followed by obligations that already need regular funding. Family is a large part of those obligations. 84% of the members we surveyed regularly support their extended family, most often with day-to-day upkeep, school fees and medical bills, and many said they feel obliged to send money home.

Easy credit is another drag. 68% had borrowed from mobile lending apps such as Fuliza and Tala, and 57% of those who borrowed said it had hurt their saving habits.

Many feel informed: 60% agreed that they know enough about their investment options, and 71% said they often read about investing and saving. Yet 44% had not used a financial adviser for saving and investment decisions, against 35% who had. Among members with a spouse or partner, 51% plan their finances and savings together.

Overall, only 12% agreed that Kenyans have a good savings and investment culture, a sign that more needs to be done to encourage saving and investing.

These statements indicate that even if the respondents are saving, they are saving for long-term projects including education and not for retirement.

What this means

For members and savers, our report encourages setting short-, medium- and long-term saving goals. It also recommends planning finances jointly with a spouse or partner, which it says improves savings and investment decisions. The findings on mobile loans and emergency funds point to two habits worth checking.

For employers and HR managers, the study found that income levels shape saving, and the report calls on organisations to pay staff adequately for their work. It notes that employers who run pension schemes encourage their staff to save, and it calls for more financial literacy programmes designed for different ages.

For trustees and the industry, respondents asked for products that are easy to understand and reasonably priced, and for more awareness of the saving options that already exist. The report calls for products that encourage saving and investing, and for continued financial education, including financial planning for couples.

For policymakers, savings incentives such as tax relief were the change respondents suggested most often. The report recommends that government provide such incentives, with more and better ones for saving through retirement schemes, since SACCOs are currently the more popular choice. The full report sets out the detailed results, charts and references.

What we recommend

• Keep up financial literacy to raise awareness of saving and investing, including financial planning for couples.
• Government should offer incentives such as tax relief to encourage saving and investing, with more and better incentives for saving through retirement schemes.
• Financial service providers should develop products that encourage saving and investing.
• Set short-, medium- and long-term saving and investment goals; most save less than the recommended minimum of 20% of income.
• Increase financial literacy programmes designed for different ages, to help people manage their money and debt.
• Plan finances jointly with a spouse, which improves savings and investment decisions.