Financial Literacy and Household Savings in Kenya
Abstract
Kenya has made significant progress towards access of financial services with the hope that
increase in financial access would certainly raise household savings. Despite the Significant
progress made by the Kenyan government towards improvement in financial access and
becoming highly inclusive compared to most Sub-Saharan African countries, the gross
domestic savings as a percentage of Gross domestic product (GDP) has declined
continuously from 8.231% in 2016 to 4.4451% in 2019 according to 2016 and 2019 World
bank indicators. Given current financial markets situations in Kenya and across the world,
serious concerns have been raised concerning household’s financial literacy. The
development and widespread of financial service providers have certainly left households
with a confusing wide range of investment and financial choices that ought to be selected.
This therefore implies that more focus should be directed on how well-equipped individuals
are in making financial decisions relating to savings and other investments. The study aimed
to investigate the effects that financial literacy has on Kenya’s household’s savings, establish
the level of financial literacy of Kenyan households and lastly, explore other factors that
affect savings among households in Kenya. Employing probit regression analysis the study
used secondary data from the 2019 Kenya Finaccess national household survey. The study
points out that Kenyan households possess very low scores in relation to financial literacy
with approximately 49.25% of individuals using their savings to repay available loan.
Females, individuals aged 60 years and individuals with no education are less financially
informed. Moreover, households earning high monthly income and those located in urban
areas are highly financially informed compared to those that earn low monthly income and
located in rural settings. The estimates showed that households financial literacy positively
and significantly correlates with households savings. Other significant factors determining
savings of households include; individual’s age, education, Occupation, household size, use
of mobile money, gender and income level.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Economics [237]
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