Government Report Shows Where Kenyans Are Keeping Their Savings

A new government report published by the Kenya National Bureau of Statistics (KNBS) illuminates Kenyans' saving patterns. 

The Economic Survey 2024 report highlights how much Kenyans save in various financial institutions, including commercial banks, micro-finance banks (MFBs), and deposit-taking savings and credit cooperatives (DT-Saccos). 

This article will discuss the specifics of deposit trends across commercial banks, micro-finance banks, and DT-Saccos and how these savings patterns have evolved over the past year.

Read Also: Why Where You Put Your Money Matters 

Deposits in Commercial Banks

According to the survey, time and savings deposits in commercial banks increased by a remarkable 25.9% as of December 2023, compared to 6.8% growth in December 2022. The total amount of time and savings deposits increased from Ksh2.012 trillion in December 2022 to Ksh2.533 trillion in December 2023. 

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Time deposits, also known as fixed deposits, are bank deposits that require the depositor to leave the funds in the account for a predetermined period. In exchange for keeping the money deposited for the agreed-upon term, the bank pays the depositor a higher interest rate than regular savings accounts.

According to the survey, demand deposits in commercial banks increased from Ksh2.120 trillion to Ksh2.522 trillion during the same period. 

Demand deposits are bank accounts from which deposited funds can be withdrawn without prior notice. They serve the daily banking needs of individuals and businesses alike and typically include current accounts and regular savings accounts.

Total deposits held by commercial banks surged from Ksh4.132 trillion in 2022 to Ksh5.054 trillion million in December 2023.

Deposits in Micro-Finance Banks

Micro-finance banks (MFBs) are crucial in providing financial services to segments of the population often underserved by traditional banks. However, the latest data indicates a decline in their deposit liabilities.

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According to the KNBS report, MFBs' total deposit liabilities decreased by 4.7%, from Ksh44.7 billion in December 2022 to Ksh42.6 billion in December 2023.

Demand deposits decreased from Ksh6.262 billion in December 2022 to Ksh5.871 billion in December 2023. Time and savings deposits decreased from Ksh38.46 billion in the same period to Ksh36.748 billion. 

Deposits in DT-Saccos

Deposit-taking savings and credit cooperatives (DT-Saccos) are integral to Kenya's financial ecosystem and provide their members with financial services like savings accounts and loan facilities. The KNBS Survey indicates a positive trend in the deposits held by DT-Saccos. 

According to the report, time and savings deposits in DT-Saccos grew by 9.8%, from Ksh522.4 billion in December 2022 to Ksh573.6 billion in December 2023. The total Sacco Deposits (BOSA+FOSA) increased from Ksh620.4 billion in 2022 to Ksh677.8 billion in 2023. This growth underscores many Kenyans' continued reliance on Saccos to save and access credit.

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However, despite the growth in deposits, membership to DT-Saccos declined by 59,049 members, bringing the total to 6.4 million members, according to the KNBS Survey. 

Where is The Best Place to Save Your Money?

Determining the ideal place to save among options like commercial banks, MFBs, and Saccos can take time and effort. Making the right choice depends on understanding your financial objectives, saving timeline, and frequency of access.

Different savings accounts offer distinct features. When selecting where to deposit your savings, take into account:

1. Withdrawal Accessibility: Certain accounts, like fixed deposits, impose penalty fees for early withdrawals. Conversely, withdrawing from Sacco deposits typically necessitates a two-month notice. While these two choices might offer higher interest rates, they may not be ideal for you if you need quick access to your savings. 

2. Interest Rates: Various account types offer differing interest rates or potential investment yields, which can vary across banks or Saccos. For instance, according to the KNBS Survey, the nominal interest rate for commercial bank deposits in 2023 was 10.10%, but after adjusting for inflation, it dropped to 3.50%.

3. Your Objectives: Some savings accounts, such as Sacco Deposits and Fixed Deposits, enable you to borrow against your savings. Other options, like regular savings accounts, might not have this option. If you want to take a loan against your savings, consider choosing a savings instrument offering the type of loan you need. 

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4. Fees: Evaluate the charges associated with maintaining the account, such as service charges, transaction fees, or minimum balance requirements. These costs can impact the overall return on your savings.

Four Other Places Kenyans Are Saving Money

In addition to products offered by commercial banks, MFBs, and Saccos, you have various alternative options for saving and growing your money. These alternatives cater to different preferences, risk appetites, and financial goals. Exploring these options can provide you with a broader spectrum of choices.

1. Money Market Funds: (MMFs) allow investors to invest in short-term, low-risk securities such as government bonds, treasury bills, and fixed deposits through a professionally managed fund. MMFs aim to preserve capital while generating competitive returns. They offer liquidity, have low minimum investment requirements, and are regulated by the Capital Markets Authority (CMA) to ensure transparency and investor protection. 

2. Treasury Bonds and Bills: Treasury Bonds are long-term debt instruments issued by the Kenyan government with fixed interest payments and maturity dates. They provide steady income streams and capital appreciation potential. On the other hand, Treasury Bills are short-term debt securities with maturities ranging from 91 days to one year.

Together, they offer a secure and predictable avenue for wealth accumulation depending on your investment time horizon. According to the KNBS Survey, the 91-day Treasury bill rate rose to 15.70% in December 2023 from 9.33% in December 2022.

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3. Pension Schemes: Employer-sponsored pension plans and individual retirement savings schemes offer a structured approach to long-term financial planning. Contributions to pension schemes are invested in diversified portfolios comprising equities, fixed-income securities, and alternative assets. These investments aim to generate returns that fund retirement benefits for members.

4. Life Insurance: These products offer financial protection and investment opportunities to individuals and families looking to safeguard themselves against unforeseen events while building wealth for the future. Whole life and endowment policies combine insurance coverage with a savings component, allowing policyholders to accumulate cash value over time. Premiums paid towards life insurance policies contribute to risk protection and investment growth. 

Read Also: Where Should I Keep Money in 2023? The 10 Main Options 

WRAPPING UP

When it comes to saving your money, the myriad of options available can feel overwhelming. Deciding the best place to stash your cash requires careful consideration of your financial goals, needs, and the various saving instruments at your disposal. 

To determine the best fit for your needs, consider researching and comparing different products based on returns, liquidity levels, and charges. If you are looking for a good savings account, use Money254's portal to compare savings accounts from commercial banks and MFBs.