Financial literacy is critical for sustained and inclusive growth. With an elevated level of financial awareness, as well as the right attitude and habits to make sound financial decisions, financially literate people have a general understanding of economic trends such as inflation and exchange rates and can realistically interpret the impact of spending decisions on one’s financial standing.
On the other hand, financial illiteracy can have a long-term impact across generations. If the household leader doesn’t have access to the right information about formal financial services or platforms, then there is a high likelihood that other members of the family will hold similar perspectives, leading to a negative cycle.
Positively, with the requisite capacity and knowledge, stakeholders in the financial industry can help close this literacy gap and ensure that current and future generations can fully participate in the economy.
With access to vast consumer and market data, financial institutions are uniquely placed to design and implement literacy interventions for maximum impact. Through direct and indirect engagements, they can draw insights from data on savings, borrowing and investment patterns, and come up with training materials that equip people with meaningful financial knowledge and skills.
Leveraging on their expertise and people, they can walk with individuals and businesses to eliminate information gaps and enhance financial well-being.
In Kenya, the advent of mobile money has helped drive financial inclusion, helping bank the formally unbanked. This, complemented by digital banking solutions has made it easier for people to save, borrow and invest. That said, while the country has achieved significant milestones in economic inclusion, there are still gaps when it comes to financial literacy, which ultimately leads to poor financial choices as evidenced by a low national savings rate.
To address this gap, relevant training and exposure to the right information is necessary regardless of education levels, gender and location. It is essential that financial players take a customised approach to financial literacy, taking into consideration the various idiosyncrasies of different demographics. By accounting for variables such as level of education, access to formal banking and cultural contexts, financial literacy training can be modelled to respond to a specific need, increasing the likelihood of buy in, and changed financial behaviour.
However, this can only be achieved through collaborative action by the public and private sector, whose ideas and expertise can be synergised to develop enabling policies and regulations that would promote better financial literacy. As financial literacy levels increase, people are better equipped to utilise financial tools for their wellbeing, which directly leads to socioeconomic growth. By channelling funds through formal channels and making sound financial decisions, the country benefits from a growth in domestic savings, which is supportive of stable economic growth.
In addition, financial literacy enables the proper distribution of household or business income, building financial resilience against economic shocks. In the same instance, higher financial literacy levels often translate to reduced susceptibility to financial fraud and other risks as criminals tend to target individuals with low levels of financial literacy.
A lot has been done to drive financial inclusion; financial literacy is the push that will cement this progress, allowing for sustained and inclusive growth in our communities.
An old Chinese proverb goes, ‘When the student is ready the teacher will appear’. I submit that the student is now ready …
King’ori Gathinji is the Head Investments and Financial Fitness at Stanbic Bank Kenya.
