Our Africa is undeniably a blessed continent, boasting an energetic and enthusiastic population brimming with potential. However, one glaring issue plagues this great land – the low levels of financial literacy. Today, I'm not referring to formal schooling; instead, the spotlight is on financial literacy, a critical aspect often overlooked.
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A fundamental grasp of budgeting and savings is paramount to achieving the coveted financial independence we all yearn for. Understanding
why these concepts matter is crucial, especially for underdeveloped countries
like those in Africa. For so long, we have depended on handouts that have held
us back; we have to create our own path from being broke; we are not poor. We
just have to change our mindset and approach our challenges head-on.
Financial Literacy
Embarking on the journey to financial independence demands a
starting point; financial literacy. It entails comprehending fundamental financial concepts and enabling informed decisions about saving, investing, and borrowing. For Africa and other developing nations,
increased investment in these areas is imperative to unlock the untapped
potential within their populations.
A 2021 Global Financial Literacy Survey delivered alarming
findings regarding Africans' understanding of basic financial concepts. Topics
like interest rates, loan requirements, saving, budgeting, and loan risks
revealed substantial gaps in knowledge. Shockingly, financial literacy rates in South Africa, Tanzania, Kenya, and Nigeria stood at 42%, 40%,
38%, and 26%, respectively, compared to European countries boasting 65%-75%.
S&P’s Global Financial Literacy Survey
S&P's Global Financial Literacy Survey paints a grim
picture, positioning African countries at the bottom regarding financial
literacy worldwide. The most financially literate country, Botswana, scores at 51%, while the least, Somalia, lags at 15%. With over a 10-point percentage
difference between the best-performing African country and the least in Europe,
it's evident that the African population faces a substantial journey to achieve
economic feats seen elsewhere.
Financial Illiteracy and Poverty
Financial illiteracy disproportionately affects impoverished
nations due to inadequate education systems and investment in community awareness. For instance, just 54% of over 2 billion people in Africa know how to open a bank account and
comprehend its significance. However, the growing prevalence of smartphones
presents a lifeline that stakeholders can exploit to enhance literacy levels
and promote inclusion in formal banking.
In 2022, Sub-Saharan Africa boasted 415 million smartphone
subscriptions, offering a technological gateway to financial education. A
staggering 44.9 billion mobile money transactions occurred during the year,
with Eastern Africa leading the charge at 28 billion transactions. This surge
can be attributed to the widespread adoption of MPesa in Kenya, which major regional communication giants embrace.
Dealing with Financial Illiteracy
Financial illiteracy perpetuates a cycle of poverty as
individuals struggle to manage their money effectively, resulting in poor
financial decisions and instability. However, the transactions in 2022 hint at
the continent's potential if people grasp the significance of their economic
actions beyond mere exchanges. Understanding how transactions contribute to
statements for acquiring loans, building credit histories, and effective saving
and budgeting is paramount.
It's time for financial institutions, governments, and NGOs
to spearhead efforts to elevate African financial literacy levels. This
undertaking benefits these institutions, lightens the load on governments, and empowers the public. Liberation from the shackles of
indebtedness to the West begins with generating wealth to support our
governments.
For too long, Africans have been treated as half-humans by
the rest of the world, and the root cause lies in the absence of our currency.
Reclaiming our financial sovereignty starts with mastering the basics.
Budgeting, saving, investing, and understanding interest rates form the
foundation for a liberated and prosperous Africa.
In Conclusion, financial literacy is the best catalyst for
empowering individuals and communities, leading to improved economic outcomes.
However, substantial work remains to elevate financial literacy rates in Africa
and other developing nations. As George Ayittey once said, ‘The solutions to
Africa lie here in Africa and not live aid concerts.’
As a fellow African with knowledge of these concepts, you must at least educate a single person in your immediate community. Knowledge is power, and if all of us are powerful, no one can handle us. See you in the next piece as we make Africa greater.
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