In corporate Kenya, one of the most overlooked yet crucial strategies for success is nurturing financial literacy among employees.

Despite being the largest economy in East Africa, Kenya lags behind both Tanzania and Uganda in terms of the savings rate. A survey conducted in 2021 indicates that while the savings rate in Tanzania and Uganda exceeds 20 percent, Kenya's savings rate was reported at 13 percent.

This disparity is concerning given that workers in Kenya have a higher per capita income than their immediate neighbours. This widening gap underscores the urgent need for stakeholders in the country to step up financial literacy initiatives.

By offering workers the necessary financial knowledge, organizations stand a chance to change their employees’ lives and by extension, the success of the entities they work for.

Financial literacy is the ability to effectively deploy a range of skills such as how to draw a budget, drafting an income management plan, and most importantly, sharpening skills on long-term investments.

In a 2021 survey, financial services company EFG Hermes found that an estimated 38 percent of the people in Kenya have low literacy levels on personal finance. This appalling status manifests in the country’s savings rate.

If corrective measures were taken by employers and employees alike, Kenya’s industry could experience increased productivity, and financial stability of workers and the population at large.

How employees benefit from financial literacy plans

Empirical research shows that when workers are financially informed, they are in a better position to manage their money, including navigating debt while enhancing their savings.

Financially savvy employees are also less likely to suffer from stress and related health challenges associated with finances, a factor that can negatively impact their productivity.

Additionally, when companies promote financial literacy among their employees, they enhance the development of a team that is not only productive, but also focused, and motivated.

With a financially informed workforce, organizations are less likely to experience heightened turnover as more workers turn loyal to the core mission of the business.

Workers who feel supported by their employers in managing their finances are also highly likely to work for them in the long term. This loyalty is especially crucial for SMEs in Kenya, an industry where attracting and retaining skilled workers is an asset crucial for scaling up.

Workers who have a good understanding of savings and budgeting are further less likely to experience burnout and have a higher chance of setting up prudent plans for their retirement.

SMEs that take deliberate initiatives to invest in the financial literacy of their workforce, are likely to register improved earnings and the overall well-being of their workforce.

Read also: Absa Life Assurance Kenya earnings up 90% to Sh862 million

Fostering financial literacy

Corporate organisations in Kenya can initiate financial literacy plans targeting their workers by partnering with institutions such as banks, insurance and investment firms, and scheduling workshops on critical topics like savings.

Firms can choose to integrate financial education into workers’ benefits packages, for example, by rolling out services on financial planning to encourage staff to meet their personal financial goals.

Absa Bank Kenya is one of the financial service providers offering tailored wealth management products that meet the needs of different investors. Such products can help corporations, SMEs, and individuals to leverage practical tools to enhance their financial health.

Two such products are Absa Individual Pension Plan and Absa Umbrella Pension Plan, both offering private pension accounts to individuals and entities; aiming to address old-age poverty, explains Elizabeth Irungu, Absa Bank Kenya Head of Asset Management. She adds that a private pension plan for an individual is an attractive investment vehicle that allows one to put money that is intended for access in their retirement stage.

On the other hand, SMEs  can invest in a unified private umbrella pension plan allowing them (employer and employees) to maintain compliance to NSSF regulations whilst enjoying superior returns from their pension contributions.

Other benefits of private pension savings include tax exemption for upto Kes240,000 per annum, compounded annual returns, easy access to benefits upon retirement, use of the benefits to access affordable housing, inclusivity for all size of contributions, economies of scale and continuous financial wellness trainings by Absa.

As the fund managers, Absa ensures that the funds are invested in line with the Retirement Benefits Authority guidelines, maintains duty of care, pursues superior performance and ensures prudent investment risk management. There are no regulatory minimum to start a private personal pension plan while for the SME, contributions are as per the NSSF Act.

With a financially empowered population, Kenya will stand on a better path of fostering a more favourable business climate for investors and individual growth, too.

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