I sent this article to the standard and since they didnt print it, I thought I might just as well post it here.
Its in reference to remarks made by Mr Uhuru Kenyatta during the launch of a steering committee on establishing Nairobi International Financial Centre (NIFC) in Nairobi on Tuesday.
Financial Literacy not Financial Access
Deputy Prime Minister and Minister for Finance Uhuru Kenyatta singling out increased access to financial services and competitive interest rates as key to enhancing the country's economic competitiveness should be challenged. While diversity and increased access to financial services is welcome, I propose that financial literacy will play a greater role towards enhancing the country’s economic competitiveness.
The assumption that increased access to financial services as opposed to information about them is key to enhancing the country's economic competitiveness.must be challenged. Information and the availability of information about financial services (variety of product, features, accessibility, eligibility, benefits, risks etc) will enhance Kenya’s economic competitiveness even more. Financial services are widely available in and out of Kenya, accessibility is limited by people’s knowhow not by the lack of financial services. Empowering Kenyans to make enlightened financial decisions and then seek out financial services that cater to their financial goals. What’s the use of hundreds or thousands of financial services if the target market is not financially literate?
Financial literacy will reduce the potential calamities such as loan defaults, foreclosures, bankruptcy, and living beyond one’s means. Such calamities would end up slowing the growth of financial services.
A study carried out by Microfinance Opportunities shows that “Low financial literacy in the developed world puts people at a disadvantage in making decisions about savings, retirement, debt management and investments, and consumers who are financially literate are more likely to behave in financially responsible ways.” The same case applies in Kenya; we have Banks, Stockbrokers, Investment Banks, Saccos, Insurance, Pension Managers, Saccos, Microfinance etc. These financial service providers are accessible to majority of Kenyans, yet only a small percentage uses them. The bottleneck is not in accessibility; it is in the lack of financial literacy.
Kenyans are generally enthusiastic about investments; this is evidenced by the influx to invest in stocks, bond, real estate and on the negative side – pyramid schemes. The enthusiasm is not complemented with knowledge. That makes many Kenyans vulnerable to fraud, and unexpected losses.
Mr. Uhuru should advocate from financial literacy. He is in a position to initiate a financial literacy program with the support of Treasury, Central Bank, RBA, CMA, KBA and IRA.
As for the suggestion that financial services access is the solution to enhancing economic competitiveness, I have a simple question: would you rather have a financially literate country with the same financial services or financially illiterate country with plenty of financial services?
I agree entirely on this. We are quickly generating financial solutions and nobody is investing in financial literacy. When did anybody request the bank for a statement unless it was required by another bank for a loan? Even if it was requested, are we be able to read and understand it? Ignorance is indeed a goldmine for the financial institutions in this side of the world, and with poor consumer protection laws, the billions profits will continue to be declared.
ReplyDeleteAbsolutely James.
ReplyDeleteFinancial institutions are making billions out of financial illeteracy.
Its about time people take initiative and learn all there is about financial services, financial institutions and lobby for better regulations.
Excellent article! Sometimes I think in the case of technology & financial services our countries development in those two areas grew faster than the minds that use them. I think it's time that they just stopped and taught the basics. Btw the way in the long run this is actually going to be the downfall of these industries if people don't actually understand why they need such services and how they can impact their lives. A smart business will not only invest in the product it's selling to it's customer but to stay in the game they have to also invest in the consumers ability not only to purchase but to deduct, negotiate the worth (in case of multiple services) of one service over another.
ReplyDeleteAnother thing, what is the point of selling something today, if you can't guarantee the future financial well being of a customer to come back and buy it again?
Excellent article, I hope to read more of this on your blog.
I just noticed from your blog list that you have listed the blog by Wanjohi wa Kigogoine ?! Seriously ?! Why would anyone want to follow such a lewd tasteless blog. I think it deducts from a readers experience to list that blog amongst the other worthwhile blogs on your list. That's like throwing your used condom at your front door for your guests to see.
ReplyDeleteHi Bee,
ReplyDeletethank you for your encouraging words.
The shortsightedness of many financial institutions (banks, insurance companies) are bewildering. They are concerned about the here and now; and unfortunately our leaders--especially the minister does not see the need to educate people about finances.
As for the blogs that I follow; I am in the diaspora and sometimes I read Kenyan blogs for the entertainment sector (regardless of how backward they seem) A well know psychologist once said--we watch and read some stuff to make our situations/difficulties/thinking seem normal. I may not agree with what he says but his writing method and way of narrating is entertaining. I am not scared to share what I read or think--hence the point of having a blog