Kenya’s Financial Literacy Deficit

flThe Good Holy book (Bible) says in some verse that “My people perish due to lack of KNOWLEDGE”; and I say, MOST Kenyan poor people continue and will continue to languish in poverty due to “LACK OF FINANCIAL LITERACY”.

 Yesterday I was out and about around campus and its environs with a close friend of mine putting our marketing skills into a test drive. We were working with Old Mutual, an investment company in Kenya in introducing a new product to the students and any other interested parties around campus. Our work station was in the University of Nairobi, School of Business at Lower Kabete Campus.

The product we were introducing to the students is called i-INVEST; which enables the generation-Y folks like me and my schoolmates to invest in money markets and specifically treasury bills through a mutual fund by just using our phones. Sweet as it may sound with even free registration to get an account through their phones; still many of our clients yesterday could not get to understand why they needed to start saving for their future and invest to earn returns in their money at very competitive interest rates that beat any other in the market.

The students had a problem with parting with ksh. 10 from their phone credit to register and try out the new investment vehicle customized to suit their needs. That not being all, most of them could not find sense in investing small amounts in mutual funds and waiting to see their portfolio grow. At that point I realized just how “difficult” the simple concept of compound interest is to many of our students, though it is learnt in primary school. They could not see how the power of compounding working on their money over a long period of time could change what seemed like pea nuts today into millions or even billions in the fA4 i-INVEST aduture.

I also realized that patience is a gift with which many people are not gifted with. Most students were not willing to buy the concept of investing and waiting for some time for their money to gain substantial gains before maybe thinking of withdrawing it or investing in a different financial asset. The culture in most Kenyan youths is that of getting money “here and now” not that of “investing for high returns the future”. They care less about the future and live for today and now. Maybe breaking that myopic mentality will be the biggest task we have to do to open up the minds of the young people to start thinking about investments and development.

It also came as a surprise that most students despite being in the Premier School of Business in East and Central Africa, they did not understand much about financial assets and the money and capital markets where they are traded. This not being the fault of our highly qualified lecturers who in all widths and lengths explain these concepts to us in classes; but being the students’ personal ignorance and lack of interest. I thought for a moment that most of us just read for exams and after downloading everything on the exam papers, the remaining we tend to damp in the recycle bin. Maybe it’s time we  start restoring whatever is left in the recycle bin into our mental faculties where they belong, and start using the content for our own good.

I must say, the deficit in financial literacy amongst most Kenyans is shocking. If students of business in the Premier School of Business are as in-informed as I discovered yesterday, then Vision 2030 might just be a white elephant. With such little financial literacy, I wonder just how we intend to create more wealth and grow our GDP as a country and improve the living standards in our households!

fl 2My mind went back to my village where such financial jargon as mutual funds, money markets and the likes is an alien lingual better not spoken; since it will stir more confusion than help the members of the society get to invest. The fate some have had in the past with pyramid schemes also makes it even more complicated and difficult to convince them to invest in the genuine investment vehicles available today in the market. All the rural people see, are young people who want to steal from them their hard earned money; it’s a sorry state of affairs!!!

As my mind was going forth and back, I realized that why we are not yet a developed nation in Kenya is not due to lack of resources, but due to lack of financial literacy with which to utilize the resources available to create wealth. Until we impact financial literacy in our youths and the common citizen in the grassroots, we shall always continue to rely on donor funds and grants to run the affairs of our country; and the new county government system shall end up as a sham!

It’s time we put the first things first.


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