It is critical that financial literacy is improved across the African continent- and fortunately, there has never been a better time to take up the challenge. Financial literacy has many definitions, but a widely used one is from Standard & Poor (S&P), who in their Global Financial Literacy Survey defines it as the ability to ‘understand essential financial concepts in making informed decisions about saving, investing and borrowing’.
This survey went across the world and found rates of financial understanding amongst Africans to be alarmingly low. Simple questions were asked around topics such as diversification of risk, calculating interest repayments and knowledge of transaction costs and a percentage of correct answers/ literacy rates were captured for each country. The finding showed that where many European countries, for example, had literacy rates of circa 65-75%, many African countries fell well below, such as South Africa (42%), Tanzania (40%), Kenya (38%) and Nigeria (26%). This is a profound issue, as it shows the majority of these populations are not able to navigate their lives effectively and are certainly not planning their financial futures to any real extent.
Growing Mobile Phone Penetration Opportunity
These low financial literacy rates are bad news, but the good news is we can massively improve the situation very quickly and key to this is mobile phone usage. The number of people that will have access to mobile phones over the coming years will increase at a phenomenal rate across Sub-Saharan Africa particularly. Unique mobile subscribers will increase from 477 million in 2019, to 614 million by 2025. Of these users, a huge 475 million will have internet access through their phone by 2025. This is so important, as it allows people of all backgrounds and genders, rich and poor to seek information, education and fintech organisations there to help people understand how to save and invest.
Much more can be done to improve financial literacy
But there is so much more we can do whilst this mobile internet adoption continues to take place. Financial institutions like my brokerage, Equiti Group (EGM Securities/ FXPesa) will persist in increasing the education they are supplying. Seminars/ Webinars, financial literature, videos, podcasts etc must all be utilised now. We spend a huge amount of time, energy and money shipping out educational content to our clients. This knowledge needs to be balanced and open eyes to exciting short-term returns + investing for the long-term. For example, there is a current hysteria around Cryptocurrency trading across Africa, with those investing solely in assets like Bitcoin expecting 40% returns each and every week. This isn’t understanding financial literacy, this is purely hoping for short-term profits. On Twitter, I am constantly reminding those new to trading to diversify across asset classes, understand commodities, Foreign Exchange (FX), Crypto, US Stocks and Indices. These global markets have given fantastic returns lately. Beware anyone on social media that is promising you huge and immediate returns without diversifying, they are most likely a scam. Financial freedom and literacy are about educating yourself, sacrificing so that you can save money and then investing/ trading securely with the right partners. I believe that the young are the most susceptible to this issue, and that’s why I’m looking to speak to as many university students across Africa as possible this year.
Combined mission across government, educational centres and fintechs
So African Governments, education centres and corporations operating on the continent, have a huge responsibility to step forward and improve this situation. As a CEO of a large Fintech company operating across Africa, my team and I accept the challenge- join me on this mission @BJMyersUK