The financial strain faced by Kenyans has become increasingly pronounced due to stagnated income streams and the resulting impact on their financial decisions.
According to the Old Mutual Financial Services Monitor (OMFSM), a pioneering study providing comprehensive insights into the Kenyan financial landscape, 9 out of 10 Kenyans currently earn either less than or the same as they did before COVID-19.
Understanding the Debt Landscape in Kenya: A thread.
Kenyans are heavily reliant on credit vehicles for financial support, with credit cards, personal loans from Chamas, and borrowing from friends/family being the most common methods. #knowbetterdobetter pic.twitter.com/xO5evLlXq8
— Old Mutual Kenya (@OldMutual_Ke) February 7, 2024
Kenyans’ confidence in the economy is at an alarmingly low 16 per cent, reflecting the challenging macroeconomic environment.
As a result, many citizens have been left financially strained and grappling with reduced funds.
Data also showed that satisfaction levels with current household income are poor, with only one in 10 individuals expressing contentment.
However, higher-income earners exhibit slightly more satisfaction.
“Due to this and the challenging macroeconomic environment, Kenyans confidence in the economy is very low at only 16 per cent,” Group CEO Arthur Oginga said during the launch of the study.
The Old Mutual Financial Services Monitor aims to empower individuals, businesses, and policymakers with a holistic understanding for informed decision-making and greater financial well-being.
The study noted that dependents, such as children and elderly parents, contribute significantly to Kenyans’ financial stress.
In the report, three out of four working Kenyans have children, many of whom are less than 12 years old. In addition, approximately 58 per cent of Kenyans have other adult dependents, primarily their parents.
As a result, 46 per cent of Kenyan adults find themselves in the “sandwich generation”, meaning they are financially responsible for both their children and elderly parents.
Debt as a Coping Mechanism
The strain on household finances has led many families to rely on debt to make ends meet. For instance, over the past year, 41 per cent of Kenyans borrowed money from family or friends.
One in four turned to Chamas (informal savings groups) with an estimated 38 per cent using their savings to sustain themselves.
Old Mutual Investment Group managing director Anthony Mwithiga said Kenyans need to engage more financial advisers in the current tough economic environment to cushion them from financial stress.
“The journey to being financially well in current economic time begins with the right advice from the right people,” Mwithiga said.