Financial literacy is a subject of utmost importance that Africa as a continent should necessitate. Financial literacy is the ability to ‘understand essential financial concepts in making informed decisions about saving, investing and borrowing.’
A Financial Literacy Survey highlighted that Africans’ financial literacy understanding is alarmingly low. Topics such as interest rates, loan requirements, saving, budgeting, and loan risks are among the many areas most Africans lack knowledge of.
Financial literacy rates in countries such as South Africa, Tanzania, Kenya, and Nigeria recorded percentages of 42, 40, 38, & 26, respectively, compared to European countries showcasing a 65% -75% literacy rate. This brings us to the realization that the majority of the population in Africa faces difficulty in financial mobility.
Most of those living in developing countries do not necessarily have the capacity and financial capability to effectively plan their financial future or invest in financial knowledge due to the general economic instability and financial issues faced in the family unit.
The actualization is that Africa is in dire need of financial literacy improvement. Improvements will ensure Africans are educated on investing and loan acquiring for individuals to engage in growth-related financial practices.
Loan availability and investment opportunities are a few improvements granted to Africans via Africa Development Bank and several other institutions. The ADF contributes to poverty reduction and economic and social development in the least developed African countries by providing concessional funding for projects and programs and technical assistance for studies and capacity-building activities.
Bank lending rates are now at;
South Africa 8.25
Egypt 10.4
Kenya 12.22
Liberia.
12.44
These are workable interest rates for the “common mwananchi,” enabling individuals to acquire loans to start businesses and generate income via entrepreneurship and investment in assets, building the financial capacity of Africans and African countries. For example, the number of Kenyans taking loans from financial institutions has risen by 10 percent since 2019, reaching about 14.4 million, occasioned by a slight improvement in financial literacy.
However, most developing countries in Africa are wallowing in debt due to the increase in debt interest; African governments are paying interest of 5 to 16 percent on 10-year government bonds, compared to near zero to negative rates in Europe and America.
On average, interest repayment is the highest expenditure and remains the fastest growing expenditure in sub-Saharan Africa’s fiscal budgets.
All hope isn’t lost. Financial literacy improvements are progressively expanding due to the increase in mobile phone usage, and internet access creates an environment of knowledge obtainability.
The number of people with access to mobile phones will promisingly increase. Unique mobile subscribers will increase from 477 million in 2019 to 614 million by 2025. Of these users, a vast 475 million will have internet access through their phones by 2025.
Financial literacy via technology and online financial literacy companies is helping educate Africans and spread awareness on crucial financial services. Other improvements include the willingness of financial institutions to educate through seminars/ webinars, financial literature, videos, and podcasts to utilize digital platforms and technology, which is continuous support for information transmission.
Financial educative content should be broadcast extensively to cultivate the growth of well-equipped and financially literate people.
