Executive Director of the Kenya School of Monetary Studies Professor Kinandu Muragu says most of those lacking understanding in money matters are in urban areas.
“Financial literate people never participate in pyramid schemes. However pyramid schemes are not for the people in the villages. It is for the urban dwellers, because they want a return of 100 percent without working for it. But if you are financially literate, you will always ask the fundamental questions -where are you going to earn 100 percent return from?” said Muragu.
He explained that many urban dwellers are hungry to invest, but they lack basic skills in business, hence being trapped into investing with fake financial institutions which have not been licensed by the Central Bank.
Speaking during a consultative forum on financial literacy in Nairobi, Muragu said Kenya has been overtaken by other countries like India in financial literacy where instead, 86 percent of its citizens have financial know-how.
He said financial illiteracy was making Kenyans not be able to raise queries on the high lending rates nor demand good services from the financial institutions and enquire on the whole issue of inflation.
“Financial literacy and an understanding of it allow us to deal with savings rate, the return you get from committing your savings. You are able to go to a bank because you are financially literate and ask the bank, why do you want to give me, one percent? Infact in one bank I think they are paying 0.3 percent. You don’t have to speak in English, you can speak in vernacular!” said Muragu.
He has challenged the Ministry of Finance to put much effort on this issue, as it stands a threat to economic growth in the near future.