Majority of Kenyans in poor financial health - survey

Treasury Cabinet Secretary John Mbadi pointed out the substantial progress in reducing the gender gap in financial inclusion. [File, Standard]

A new survey shows that Kenyans' financial health remains a significant concern, even as the country continues to make strides in financial inclusion.

The 2024 FinAccess Household Survey by FSD Kenya shows that 81.7 per cent of Kenyans are financially unhealthy, facing challenges in managing daily expenses and investing for the future.

FSD Kenya chief executive Tamara Cook said that while there has been a slight improvement in overall financial health—from 17.1 per cent in 2021 to 18.3 per cent this year—the percentage of people able to save or invest for the future has sharply declined.

"What we've seen is that financial health has declined over time, with a slight increase in 2024. However, the ability to invest for the future is a critical area where we have seen a significant drop," she said yesterday during the launch of the report in Nairobi.

The concept of financial health, as defined by the survey, goes beyond mere access to finance; it also measures how well individuals manage their day-to-day finances, cope with risks, and plan for the future.

Although many Kenyans are better equipped to handle their day-to-day financial needs and cope with immediate financial shocks, their ability to plan for long-term financial growth has significantly deteriorated.

One of the positive developments highlighted in the survey is the narrowing gender gap in financial health, which has reduced from 4.7 per cent in 2021 to 1.6 per cent in 2024.

While this represents progress in women’s economic empowerment, there are still significant challenges.

Women continue to lag behind men in the use of financial services such as banking, Saccos, and digital credit platforms.

“The narrowing gender gap is encouraging, but it’s essential to recognise that women’s engagement with financial services continues to be lower, affecting their overall financial health,” Cook added.

The government has also acknowledged the ongoing challenges related to financial health.

Treasury Cabinet Secretary John Mbadi pointed out the substantial progress in reducing the gender gap in financial inclusion.

"The government’s policy reforms and a stable financial system have contributed to this progress," said Mbadi. "Mobile money, introduced in 2007, has played a pivotal role in driving financial inclusion."

Kenya’s economic performance is also showing mixed results.

One of the positive developments highlighted in the survey is the narrowing gender gap in financial health, which has reduced from 4.7 per cent in 2021 to 1.6 per cent in 2024. [iStockphoto]

Central Bank of Kenya (CBK) Governor Kamau Thugge noted that the country’s real gross domestic product (GDP) grew by 4.6 per cent in the second quarter of 2024, down from 5.6 per cent in the same period of 2023.

Inflation, however, has decreased significantly, standing at 2.8 per cent in November 2024, compared to 6.8 per cent in 2023.

"The Kenyan Shilling has appreciated by 17.4 per cent against the US Dollar, driven by business inflows and exports such as tea. Our current account deficit is projected to be four per cent for 2024, and the Central Bank is prepared to take necessary actions to maintain macroeconomic stability," he said during the launch.

Since 2006, Kenya has made remarkable progress in financial inclusion. The FinAccess survey indicates that 84.8 per cent of the adult population now has access to financial services, up from just 26.7 per cent in 2006.

The number of people excluded from financial services has fallen from 41.3 per cent to 9.9 per cent, and reliance on informal financial services has dropped from 31.1 per cent to 5.2 per cent.

However, despite these positive strides in financial access, the survey highlights that the overall financial health of Kenyans remains a concern.

The ability to manage, save, and invest is still a significant challenge for many.

In response, the CBK is rolling out the Dow CSD system, which simplifies access to government securities, and working on reforms in consumer protection and financial literacy.

A troubling trend identified in the survey is the decline in Kenya’s savings culture. The proportion of people able to save has decreased since 2021, indicating that many are prioritizing immediate financial needs over long-term savings and investment.

This shift is particularly evident across various sectors, including agriculture, casual labor, and small businesses.

Small and medium-sized enterprises (SMEs), which are crucial to Kenya’s economy, are also facing significant financial constraints.

"Financial health for businesses has significantly deteriorated, with SMEs struggling to invest in future growth," said Geraldine Luca Makunda, a research specialist at FSD Kenya.

"Despite this, SMEs remain a vital livelihood source for many Kenyans, and we are confident they will continue to survive and eventually recover."

Experts said more work is needed to improve Kenya’s overall financial health. While the narrowing gender gap in financial inclusion is an important achievement, the country must tackle challenges such as the declining savings culture and the difficulties faced by SMEs.

These issues are likely to be central to the efforts of policymakers, the private sector, and development partners as Kenya works to build a more financially stable future.