Financial stress deepens as 78 per cent of Kenyans earn less than before Covid-19 period - Report

More than three-quarters of Kenyans (78 per cent) have seen their earnings decline in 2024, highlighting the economic difficulties facing workers.

The 2024 Financial Services Monitor by Old Mutual paints a picture of financial distress, with many struggling to cope with rising living costs and job insecurity. The report shows that while 34 per cent of Kenyans have maintained the same income levels as in 2023, only 22 per cent are earning more.

The findings highlight widespread financial stress, with almost half (48 per cent) of working Kenyans feeling financially strained. An overwhelming nine in 10 consumers are earning the same or less than they did before the Covid-19 pandemic, meaning most have less disposable income than before the crisis.

As a result, the report notes that confidence in the economy remains low, with only 16 per cent of Kenyans expressing optimism about the economic outlook. It adds that the situation is worse among younger people, with confidence levels dropping to just seven per cent among those aged 20 to 29.

According to the report, financial obligations are a major contributor to stress, with three in four working Kenyans having children, most of whom are under 12 years old.

Additionally, 58 per cent provide financial support to other adult dependents, primarily their parents.

Sandwich generation

This has resulted in 46 per cent of Kenyans belonging to the so-called “sandwich generation”, meaning they are responsible for both children and elderly family members.

“Financial dependency remains substantial. There are significantly more households that have children (80 per cent), which, once again, highlights the financial burden placed on income generators,” reads the report.

The report also adds that education remains a top financial priority, with 40 per cent of Kenyans saving specifically for their children’s schooling.

The cost of education is also the most common unexpected expense leading to loan applications. In the past year, 41 per cent of Kenyans borrowed money from family or friends to sustain themselves, while one in four sought loans from chamas (groups where people pool their savings to invest in a common goal). Additionally, 38 per cent depleted their savings to cover daily expenses.

Debt repayment is among the top three financial priorities for Kenyans, with formal credit sources including credit cards (34 per cent), personal loans from chamas (25 per cent), and personal loans from friends or family (24 per cent).

Meanwhile, 37 per cent rely on mobile money loans. When it comes to savings, 22 per cent of employed Kenyans use saccos, while chamas remain popular, with a 44 per cent participation rate. These informal financial groups are primarily used for saving towards education, property acquisition, and business ventures.

Self-employment

Entrepreneurship is also a key financial strategy for many Kenyans, with over half engaged in self-employment or business ownership. However, most businesses are small-scale, operated by the founder alone or with a team of five or fewer employees.

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Starting a business ranks as the second-highest savings goal, particularly among those under 50 years old. Additionally, 22 per cent of Kenyans are classified as “polyjobbers,” meaning they earn an extra income alongside their regular jobs.

Despite recognising the importance of long-term financial planning, the report notes that many Kenyans struggle to prepare for retirement.

While 81 per cent acknowledge the need for retirement savings, only 26 per cent have actually started saving.

Retirement planning ranks low among financial priorities, coming in ninth place. Instead, about half of Kenyans hope their children will support them in old age. Those who have begun saving for retirement do so through pension funds, saccos, and bank savings accounts.

Access to financial guidance remains limited, with almost nine in 10 Kenyans lacking a financial adviser. Further, 43 per cent do not know who to turn to for financial advice, while only one in five receive financial information from their employers.

Despite the economic challenges, the report states that many Kenyans remain hopeful, with 63 per cent expecting their financial situation to improve in the next six months.

They attribute this optimism to potential business growth, better job opportunities, and increased investment prospects.