NAIROBI The government is working on a policy to raise the level of savings in Kenya as the current low savings rates is crimping economic growth, says National Treasury Cabinet Secretary (Minister) Henry Rotich.
The government is keen to raise the domestic savings rate from the current 12 per cent to above 30 per cent to fund development projects in the country. Rotich says the policy will address, among other issues, the low interest rates offered by banks for deposits.
Thirty years ago, savings levels in Kenya were some of the highest on the continent because of what policy makers say was a conducive environment which encouraged savings. But the collapse of several banks, coupled with the low interest rates paid by commercial banks, has dampened the spirit of saving in the country.
This is hurting economic growth in the country by denying the government access to development funds, resulting in it having to resort to expensive borrowing from the international market.
Speaking during the ongoing inter-ministerial public symposium here Friday, Rotich said the policy on savings would help boost savings to 30 per cent by the year 2030.
Currently, more than nine in ten account holders in the country have less than 100,000 shillings (about 990 US dollars) in their bank accounts. In addition, 96 per cent of Kenya’s 31 million bank accounts are demand deposits.
Qatar has the world’s highest national savings rate of 57.63 per cent while in Africa, Algeria leads with a national savings rate of 54.31 per cent of gross domestic product (GDP). Sub-Saharan Africa has the lowest savings rate in the developing world.
While figures vary from country to country, gross domestic savings in the region averaged about 18 per cent of GDP in 2005, compared with 26 per cent in South Asia and nearly 43 per cent in East Asia and the Pacific, according to World Bank estimates