Transcript Document

SASI
Savings Round Table
Rhodes University
26 May 2005
“A micro view”
Darrell Beghin
FinMark Trust
FinScope & Financial Diaries
Making Financial Markets Work
Who and What ?
• Insights
– consumer paradigms & realities
– product consumption
• Questions & opportunities
Making Financial Markets Work
Consumer Realities - Income sources


On average, consumers claim to have only one source of income
Almost one-third of the population obtains money from friends/family as their main source of income
Average number of mentions: 1.1
Money from family
Never banked 44%
Black 32%
30
Salary from a company
17
Child grant
9
Salary from an individual
9
Self-employed
9
Government pension
Currently banked 34%
White 33%
8
Piece work
5
Other pension
4
Informal work
2
Any other type of grant
2
Don't get money





Never banked 21%
Coloured 14%
12
%
0
10
20
30
40
50
All 1%:
Maintenance
Private sale of goods
Financial investments
Gambling
Lottery
(n=2988)
Consumer Realities - Household risks
Factors likely to impact finances
Total sample
2003
(n=2984)
%
2004
(n=2895)
%
32
43
34
40
35
35
24
31
N/A
27
24
21
23
23
18
24
N/A
17
10
14
11
8
11
10
N/A
11
6
8
8
9
7
7
6
7
6
4
6
6
3
6
29
17
(n=2 988)
%
Theft, fire or destruction of property
Job loss of main wage-earner
14
Death of main wage-earner
15
Serious illness of member of household
15
Death of family member outside household
40
36
31
28
13
Illness so main wage-earner can't work
10
Flood destroying property
9
Death of partner
8
Drought
7
Stock/livestock theft
5
Increase in oil price
Loss of vehicle
42
21
4
Cut-off or decrease in payment to household
2
Abandonment/divorce
2
Loss of banking facilities
2
Loss of computer/laptop/cell phone/phone
3
6
8
17
14
None
Factors likely to impact finances
17
37
Factors likely to happen


After shelter, the
next greatest threat
is the loss of income
from the main wageearner of the
household
Overall, there are
many other concerns
before loss of
banking facilities
becomes an issue
Consumer Realities – Coping with events

Only one in eight people believe that approaching the bank for a loan is the way to deal with financial life
events
%
100
80
60
40
20
0
Friends/family seen as the first port of call in a
crisis!
26
Ask friends/
relatives/
neighbours
for money
23
13
12
10
Take loan
from
friends/
family
Take
loan
from
bank
Withdraw
savings/
investments
Apply
for govt.
grant/
aid
23
6
5
4
3
Cash in Sell
Loan
Loan
insurance assets from
from
policies
employer burial
society/
stokvel
2
Apply
for
more
credit
2
Use house/ Don’t
property as know
security for
additional
finance
2003
18+ (n=
1423)
N/A
33
12
15
21
10
12
5
4
1
N/A
6
2004
18+ (n=
1861)
26
23
14
13
11
6
5
4
3
2
2
22
Consumer Realities - Decision making
16+ years


58% of the population makes financial decisions on their own or in consultation with a partner/spouse
- Financial decision-making increases with FSM tier
- Also more prominent in white market and amongst banked segment
Non-decision making skews to younger consumers (75% of 16-17 year olds claim to make no household
financial decisions) and to the never banked (36%)
Decide alo ne
25%
Do n’ t make
these
decisio ns
20%
Co nsultatio n
with o ther
ho useho ld
members
22%
Co nsultatio n
with partner/
spo use
33%
Source: Q34
(n=2988)
Who are most likely to make decisions on their own or in
consultation with partner/spouse?
Currently banked
Previously banked
Never banked
73%
61%
41%
Black
White
Coloured
Asian
55%
80%
56%
63%
FSM 1
FSM 2
FSM 3
FSM 4
FSM 5
FSM 6
FSM 7
FSM 8
41%
46%
58%
70%
71%
74%
87%
87%
Consumer Realities- Perceptions re savings
Save & invest regularly, small amounts mount
up and you'll be secure
69%
You prefer to save where money is safe, even
if the interest rate/return is a little lower
55%
You are worried that you won't have enough
money for old age
51%
You don't trust informal associations like
savings clubs
47%
43%
You try to save regularly
You have a good idea of what
investment/returns you get on the money you
save
31%
You go without basic things so that you can
save
23%
19%
You are saving for something specific
You move your money around, to get the most
growth
10
Consumer Realities - Savings psychographics
Agree
90%
Disagree
Don't Know
86%
80%
70%
62%
58%
54%
60%
47%
50%
43% 41%
42%
40%
31%
25%
21%
30%
20%
46%
10% 4%
10%
32%
19%
22%
19% 16%
10%
10%
0%
u
Yo
To
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or
W
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dg
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on
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on
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Sa
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wi
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ef
Sa
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On
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Ha
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Tr
Consumer Realities – Buying Triggers
16+ years



Ultimately, the monthly repayments are the deciding factor
However, a quarter of FSM 8 claim that the interest rate must be the lowest possible
Credit is not something that lower FSM groups really consider as an option
When deciding to purchase an item on credit, which one of the following is most important to you?
Monthly payments
must be affordable
FSM 1
FSM 2
FSM 3
FSM 4
FSM 5
FSM 6
FSM 7
FSM 8
77%
69%
51%
44%
37%
32%
32%
25%
28%
None of
these –
don’t
55%
purchase
on credit
11%
5%
1%
Don’t know
Interest must be
lowest available
Repayment period
must be flexible
(n=2988)
Product Consumption - Ways of investing
16+ years

Overall low usage of mainstream investment instruments – bank savings accounts and burial
societies dominate
%
Have now and use
37
Savings a/c at bank
20
Burial society
Savings policy, endowment, insurance with
insurance company
9
Never had
(n=2988)
Have now and use
2003 (18+)
2004 (18+)
(n=2984)
(n=2895)
50
39
39
79
24
21
88
N/A
10
Stokvel/savings club
7
91
9
7
Retirement annuities
6
92
N/A
6
Improving your home
5
88
5
6
PO savings account
4
92
4
4
Voluntary pension/Provident contributions
4
93
N/A
5
Starting a business
3
95
3
3
Buying or making goods to sell
3
94
4
3
Product Consumption – No life insurance because…
16+ years
Skew to lower FSMs 1-3
Can't afford it
60
65% Black
69% Coloured
Don't want it
16
Never thought about it
15
Don't know about insurance
6
Don't believe in it
5
Someone else will pay
5
4
They make excuses not to pay out
Don't know how to find out where to buy it from
2
Don't know how to go about buying cover
2
Other
4
Skew to higher FSMs
43% FSM 8
Cost is the main
obstacle to entry
Product Consumption - Policy Cancellations
16+ years


Three-quarters of consumers have not cancelled any policies – White and Asian skew
Cancellations highest amongst FSM 8 – 38%
Stopped or cancelled
Don't
know
5%
Reasons
One
11%
2-3
9%
4-5
1%
None
74%
40
Could not afford it
Needed the cash
22
36% for FSM 5
30% for FSM 6
Policy matured
22
34% for FSM 7 32%
for FSM 8
Found better interest
option
15
Black 22%
White 36%
Highest for FSM 1-3
11% for FSM 8
Retired
9
Coloured 15%
Asian 31%
6
%
Other
29% for FSM 8
Product Consumption – Funeral/burial policies
16+ years


Few differences between FSM tiers – differences occur in actual products rather than number of policies
Slight tendency for FSM tier 8 to have multiple individual funeral policies
Funeral policy (individual)
Twothree
13%
Fourfive
2%
Twothree
20%
One
85%
Burial society
Funeral scheme (group)
Fourfive
2%
Six or
more
1%
Twothree
13%
One
77%
Fourfive
1%
One
86%
Product Consumption – Financial
Services
16+ years


Almost half of the population does not utilise any product offering from any of the four categories - banking,
retail, housing or loans
Tendency is to have just one product, which is typically a banking product
(n=2988)
42% do not have any service
58% have a service
Banking only
25%
Retail only
3%
Loans only
2%
Housing only
0%
Banking, retail
13%
Banking, loans
4%
Banking, housing
1%
Banking, retail,
loans
3%
Banking, housing,
loans
2%
Banking, housing,
retail cards
2%
Banking, housing,
loans, retail
4%
Consumption & Reality meet in Lending
16+ years
Black (n=1570)
White (n=655)
13
Buy food
36
Buy a house
Pay school fees
6
Buy a car
Buy clothes
5
Buy clothes
For funeral
4
Pay off debts
9
Pay off debts
4
Money to study
8
None
70
0
20
40
60
80
34
12
None
%
100
Coloured (n=559)
37
0
20
40
60
80
%
100
Asian (n=204)
17
Buy food
Pay off debts
8
Buy a house
5
Buy clothes
Pay for water or electricity
11
Buy a house
Buy clothes
8
Pay off debts
5
5
Repair/paint house
5
5
Buy a car
5
None
60
None
66
%
0
20
40
60
80 100
0
20
40
60
80
%
100
Summary
• Consumers are:
–
–
–
–
–
–
–
–
–
–
Strapped for extra/enough cash, struggle and do without
Concerned about death and loss of income & old age
Not financially astute – consult friends and family
Varied in decision-making methods and using improper
triggers
Using savings for “credit vehicles” - save to pay for living
expenses – NOT asset acquisitions
Not all that smart about using credit
Using short term solutions and creating longer term
problems – e.g. forfeiting education to earn extra income
Unable to save for unforeseen events – heavy impacts from
extended family deaths
Afraid to ask formally how instruments work
Not making the best use of available services
Summary
• Consumers:
– Must be seen holistically – wallet split and life
stage
– Cultural beliefs and aspects need to be
considered and managed
– Also personal motivations
– Need more income to move to “life asset” savings
activities
– Should to switch from borrowing as emergency
first call to using savings – resource dependant
– Require education in money management –
absence is reflected in “mis-spend” on informal &
formal instruments
Summary
• Products:
• Not well dispersed across the consumer market -formal financial
instruments are not as well used as stokvels at the low income end
• Stokvels tend to be used for a specific time or event
• Savings accounts are used as transaction accounts
• Formal products tend to be linked to formal employment e.g.
provident funds
• Only 12% of the households seek a formal savings product without
it being connected to their jobs
• Informal instruments provide a major social structure for consumers
to interact with each other
• Money guarding is used as saving instrument but there is no
accumulation of benefits
• Most informal devices offer poor returns on investments
Summary
• Products:
– Inflexible- pricing, terms, applications, overlapping
– Require urgent innovation and simplification, also for small
business savings
– Offerings are confusing with little perceived benefits
– Hidden within formidable Service Provider structures, which
are not easy to access physically
– Need to move consumers from “consumption” saving to “life
improvement” savings and investments – huge opportunity
– Affordable savings & investment instruments required
– Informal instruments are not offering adequate returns and
carry high risks
– Informal & formal instruments could be closer – bank
accounts for savings clubs are purely entry level and more
transaction based?
– Need to create a bridge from informal to formal instruments
And so….?
• What will/should Government do?
• Will Business rise to the true market challenges?
• Where will Consumers gain extra income to balance
credit and savings utilisation?
• Are Consumers up to the challenge? Who will equip
them, and with what?
• Are you?
Thank you!
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