Despite ranking as one of the strongest economies in Africa, the average rate of saving in Kenya is lower than the continental average, with estimates showing that only about 13 percent of Kenyans save for a rainy day.
While this can be attributed partly to the high cost of living, factors such as high initial deposit requirements, financial illiteracy, lack of formal identification documents and discomfort interacting with bank officials, also contribute to the low saving rate in the country.
As a consequence, many Kenyans, particularly those operating in the informal economy, continue to rely on predatory mobile loans to sustain their businesses or livelihoods when in need of emergency funding.
In economies like South Africa and Nigeria, where the rate of saving averages 30 percent, fintech platforms have been adopted widely to address the saving needs of the informal economy.
By offering decent interest rates on even small capital deposits, these platforms encourage people to start by saving the little money they can get, and watch as their portfolio grows over time.
Leveraging behavioural psychology, some of these platforms guide clients on when and how to save or invest money by sending strategic reminders during instances or events when they are likely to overspend.
The same can be replicated here, but for this to happen, there is a need to first create an environment where products that encourage people to invest with the little capital they have and earn a return, can thrive.
The government can provide incentives such as tax rebates and reliefs to startups that develop products which address the specific needs and constraints of underserved households, to spur innovation.
By increasing the availability of low-cost savings products and matching their design to the needs and constraints of underserved people, more people in the informal economy will start to appreciate the culture of saving.
Marketing campaigns and account features that try to overcome psychological obstacles to saving can also aid in increasing the uptake and use of savings accounts.
Since most of the available investment tools have complex financial jargon that discourages people from investing, simplifying the language can help Kenyans appreciate the value of saving.
Households that save will not only be able to cope with unforeseen disruptions to their income and unanticipated consumption needs, but also to invest in things that could benefit future generations.
As American investor Warren Buffet once said, the ability to discipline oneself to delay gratification in the short-term in order to enjoy greater rewards in the long-term is the indispensable prerequisite for success.