The Kenyan pension industry contributes just over 13% to GDP with assets under management of Sh1.7 trillion. The value of the pool of funds managed in our industry is a potential basket that can enable us spur national development and bridge budget deficits. Quite topical given the ever-tightening noise of increased taxes.
This is not unique to Kenya; African governments are looking for ways in which they can raise affordable capital to fund development. Kenya desperately needs to reduce the debt burden; the time is ripe for us to look inwards for solutions to optimise our locally generated fund pools. The African Development Bank reckons that the continent needs $130bn-170bn of infrastructure spending a year. Local pension funds across the continent collectively manage $350bn yet as an industry we still grapple with ideal investment options.
Financial institutions have a role to play in leveraging their investment acumen to partner with pension industry stakeholders for accelerated growth. A delicate balance between mitigating emerging risks, safeguarding member returns and optimising the asset returns. The industry regulations offer solid governance as guardrails to protect members’ contributions.
Botched investment projects have eroded consumer confidence, the banking sector working alongside pension industry via strategic partnerships offers a unique platform to pivot growth within frameworks that have been tried and tested.
Financial institutions through joint bespoke industry forums with the pension sector stakeholders can demystify the pension savings industry by closing the financial knowledge gap especially for the informal sector. Financial education is a much-needed lever to strengthen the weak muscle that is savings culture in Kenya.
The pension sector can piggyback on the inclusion of an informal mass market in the banking sector. Pension industry growth thus far has been driven by the formal sector contributions. With over 70% of our population being in the informal sector, it is easy to see where the next phase of growth in the pension industry will come from. The existing digital landscape rails come in handy to embed the retirement savings products at a micro level thus opening the next frontier of growth.
Ms Njuguna is Sector Head Non-Banking Financial Institutions at Stanbic Bank Kenya. [email protected]
