The Poor Culture of Savings in Africa: Will Bitcoin Adoption encourage savings?




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One financial practice that serves us well as we grow old is the habit of savings. It is imperative that one saves a little of whatever amount he or she makes from any economic venture that he or she is involved in. Savings is a good practice since one can never foretell what might happen in the future. Accidents happen which can lead to long periods of hospitalization and possibly paralysis, people are laid off from their jobs day in and day out, as well as a myriad of unforeseen circumstances that can keep people out of jobs for extended periods. In such times where an individual does not have a job, having some savings comes across as a great benefit and can financially support a person while they are unable to work.

Over the years, workers in African countries have been advised to save a portion of their wages and salaries for future use. But for some reason, this advice does not seem to resonate within the continent. Every year, there is talk of how the people of Africa have a poor savings culture, the effect of which we see in the form of underdevelopment and a consistent reliance on donor partners to come to our aid. Public and private savings is minimal, almost negligible, in most African countries.

In his book “Why Africa Fails; the case for growth before democracy” Elly Kamugisha explains this theory in further detail:

“A higher propensity to save results in a lower propensity to consume. For most Asian countries, savings form about 20 percent of one’s income. In Japan it is about 18 per cent; and less than 5 per cent in Africa. According to Bloomberg’s Business Week, China has one of the highest savings rates in the world, at 38 percent and India at 34.7 percent. Therefore, during the process of economic growth and poverty reduction, individuals require a culture of saving and investment, as shown by China, India and Japan. Based on the average savings rate in Africa, it is obvious that a poor savings culture has negatively affected the economic performance of some African countries. They have, therefore, been left behind other developing countries in Asia and Latin America. Africa should therefore adopt a culture of saving for the future. Investment is facilitated by savings. A starting point is for government to initiate an aggressive campaign to encourage locals to save and invest”.

Considering Africa’s state when it comes to the issue of savings, the question that begs to be asked is, how one can save and invest when incomes that come to the individuals pocket and revenues the state generates is not enough for current expenses, as it were. How can one save when revenues and resources available to the person merely cater for the basic necessities? For many, it becomes seemingly impossible to save, hence the high interest for personal loans as well as the staggering coupon rates governments across the continent have to pay when they go in for external bonds. Savings and investments are also pertinent issues for stakeholders such as banks and finance houses in African economies. Banks and finance houses encourage their customers to save by going on marketing campaigns that purport to award prizes for their customers who are able to keep a certain amount of money in their accounts for a period of time. Banks and finance houses grow based on consumers deposits that sit with them, and they take a cut on the returns on these deposits by loaning it to governments in the form of treasuries and bonds.

Looking at savings in a wider perspective shows that anyone who saves stands to benefit in the long term. Individuals benefit by having access to emergency funds and possibly a return on investment, and government benefits in terms of a reduced balance of payment deficits and a stronger chance of rebound in the event of an economic downturn. Businesses, likewise, can make use of savings by expanding infrastructure which could not be done in the short run. Expansion means more jobs, which bring about high tax mobilization and an improved standard of living. The benefits of saving are innumerable; therefore, what could possibly be the reason why savings and investment culture is still low on the continent of Africa?

One way by which the poor savings culture can be tackled, especially in the private sector, is by streamlining the movement of money and capital. There must also be a conscious effort to redefine money not only as fiat but with an inclusion of alternative currencies such as the bitcoin. It is quite a sight to see consumers waiting in long queues in order to save their hard earned money. Such practises deter consumers from saving a portion of their income because they do not see the need for going through so much stress just to save at the bank. Bitcoin presents a perfect blend of technology and currency where consumers can store their wealth and access it at any time they desire. Savings should be structured in such a way that it is seamless and an integral part of a consumers routine. Bitcoin developers have developed systems which allow consumers to save in easier and more convenient ways. Emails, text messages, and a mobile platform are part of our everyday lives and are central to the way bitcoins are stored. An adoption of Bitcoin will let workers save without them knowing it.

Bitcoin can also efficiently streamline the movement of capital in a massive way. There are millions if not billions of idle funds all over the world. Investors in developed economies are looking for business with sound management and a bright future to invest idle funds in. Capital injection and financing is key to business growth and development, therefore, massive capital transfers to Africa powered by Bitcoin can lead to increased productivity and wealth. Bitcoin adoption can also lead to a boost in business sectors such as web development, editing, design, etc., which can allow users access to other streams of revenue apart from their traditional revenue sources.

Savings is a key component of growth, capital is a key component for business, and bitcoins can play a key role in merging the two for a better Africa.

Kwaku Abedi

Kwaku Abedi is a freelance writer/editor based in Accra, Ghana. He has an interest in Bitcoin and writes on bitcoin integration in Africa.

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