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Report: Most low income earners secluded from banking

By Mercy Ndirangu
A majority of low income earners depend on an average of ten sources of income to survive according to a new report released by the Central Bank of Kenya.


These sources include hand-outs from relatives and politicians, baby sitting and house chores for wealthy families.
However, this group remains outside any formal banking and are more vulnerable to income volatilities.
The Financial Diaries survey by Financial Sector Deepening found that a majority low income earners are the most affected by the increasing year-on-year inflationary pressures as they buy most of their commodities in small portions which tend to be expensive in the long run.
The survey which studied the financial behavior of 300 people in five counties namely; Nairobi, Makueni, Mombasa, Vihiga and Eldoret discovered that a majority of low income earners have been secluded from the formal financial services opting to save in merry go rounds and other informal methods.
Central Bank Governor, Prof Njuguna Ndungu, said the report will help the bank and other stakeholders device new ways to tapping into this group on earners.
The study says poor households in rural areas rely on remittance from friends and relatives for a quarter of their financial needs.
On the other hand dependency ratio for urban poor households is captured at six percent of their financial source for basic commodities.
The overall cost of living was 7.6 per cent higher last month than last year, with food and, housing, water and energy prices rising by an average of 9 and 7.70 per cent respectively.
The study shows that only 9 per cent of their savings are held in formal channels.

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