Co-operatives best way to get people to save

Kenya: Campaigns by established savings and credit co-operative societies (Saccos) to recruit members who are not employees of their sponsoring companies deserve widespread support.

This is because membership in a savings society increases one’s propensity to save and invest; the precursor of any economic development.

Evidence from the Asian Tigers — made up of South Korea, Taiwan, Singapore and Hong Kong — shows that a country cannot hope to move from poverty to middle-economic status without registering high domestic savings. Hoping to develop by using Foreign Direct Investment (FDI) is akin to living in a fool’s paradise.

Many countries, especially in Latin America, who tread this route, quite often, end up paying huge economic costs when foreign investors pull out their funds at the first whiff of economic or political volatility.

The dangers of capital flight are particularly felt in national securities exchanges. Invariably, turbulence in these markets have a knock-on effect on the currencies market. It can be plausibly argued that Kenya — and many African economies — was shielded from the latest financial crisis that is still rippling through countries in Southern Europe and parts of South America because of the paucity of its securities market compared to the rest of the economy.

Traditionally, the insurance sector would be the best vehicle that should be used to mobilise domestic savings. However, for some inexplicable reasons, the sector has failed to go beyond scratching the surface as the majority of Kenyans — including the majority in salaried employment — have stayed away in droves.

Perhaps, policymakers, the banks and other financial institutions might consider holding open forums where thought leaders would be encouraged to help unearth the reason why Kenyans do not trust insurance companies.

To be fair to the local industry, however, it must be observed that insurance salespeople are lumped in the same category as used-car salespeople, worldwide, so the problem is not local. The only regulations imposed should be those meant to keep fraudsters away!