how africans save money - a2ii...how africans save money financial education seminar 29 september...

Making financial markets work for the poor

How Africans save money

Financial Education Seminar29 September 2016

By Abel Motsomi


Contents

2

Contextual information regarding savings and investment

• Source of income• Financial management • Savings vs borrowing

Savings results for Southern Africa• Savings mechanisms used• Savings Strands• Key drivers and barriers

Discussion points: • Opportunities for micro‐savings• Savings is mostly associated with delayed

gratification – ‘we want it now culture’• How to curb conspicuous consumption in order to

save• Setting Savings Targets – Nigeria has a target to

reach 60% of its adults who formally save by 2020


“In short, to save means spending less than you earn”

Financial Services Board


It matters what the source of income is before devising a strategy on savings since savings rate is afunction of income.

Main sources of personal income

Botswana 2014Salaries/wages (28%)

Namibia 2011Salary/wages (33%)

Money from others (21%) Government old age pension (12%)Piece jobs (14%) Own business (11%)

DRC 2014

Farming (32%)South Africa 2014

Salary/wages (34%)Own business (21%) Money from others (34%)Money from others (21%) Government grants (30%)Salary/wages (7%)

Swaziland 2014Money from others (31%)

Lesotho 2011Farming (31%) Salary/wages (23%)Salary/wages (17%) Farming (10%)Remittances (12%)

Tanzania 2013

Farming (37%)

Malawi 2014Farming (46%) Money from others (23%)Ganyu – casual work (45%) Own business (22%)Salary/wages (8%) Salary/wages (7%)

Mauritius 2014Salary/wages (38%)

Zambia 2015

Farming (28%)Money from others (26%) Money from others (21%)Pension (21%) Salary/wages (19%)

Mozambique 2014Salary/wages (33%) Own business (15%)Government old age pension (12%)

Zimbabwe 2014Money from farming/fishing (36%)

Own business (11%) Money from others (23%)Salary/wages (14%)

Source: FinScope Surveys (country, year the survey was conducted)

Managingmoney [FinScope Togo 2016]

Difficulty with keeping up with financial commitments

Planning and tracking‐How often do you run out of money for food and other important things?

5

37%

Very Easy, 2

Easy, 21

Difficult, 59

Very difficult,

12

Not stated, 5 9

28

42

22

Always Most times Not often Never

5435

51223

Not enough income

Irregular or unreliable income

Unexpected events

Unplanned expenses

Had to pay school fees

Buying medicines

Other, specify

Reasons for running out of money


In order to practice better financial management, keeping track of spending would enable adultsto save since spending is closely monitored and saving is a norm.Financial planners always encourage adults to have a budget line item for savings and investments

Keeping track of earnings and spending

28

37

56 59 60

62

66 66

76

34

69

83

65

38

57

2936

88

0

10

20

30

40

50

60

70

80

90

100

Malawi Zimbabwe South Africa Swaziland Zambia Tanzania Madagascar DRC Mauritius

% of a

dults form

ally in

clud

ed

% of a

dults trac

king spe

nding an

d ea

rnings

Track spending and earnings Formally Included


Savings per country and region


For Lesotho and SouthAfrica, adults borrow morethan they save!

Saving vs Borrowing per country and region


Savings mechanisms used by Southern Africans …… (1)


Savings mechanisms used by Southern Africans …… (2)


Uganda and Tanzania though saving, its mostly through informal mechanisms and those saving at home whichyields lesser returns and may not be reliable means. Note that main source of income (in Tanzania) is farming andremittances while for Namibia and Mauritius its salary/wages hence more savings through commercial banks.

Savings Strands per country (ranked by incidence of saving)


Other models of savings

12

Savings at the core

Contractual savings

1 2

Discretionary savings

3

Savings in kind

Saving in e‐money

4

Savings and investments: Adults save mainly for developmental reasons [FinScope Togo 2016]

Main drivers for saving – based on the 43% of adults who save

Main barriers for not saving –based on the 57% of adults who do

not save

13

47

46

36

23

16

10

7

7

6

5

4

Living expenses when you donot have money at that time

An emergency other thanmedical

Medical expenses eitherplanned or emergency

Starting or expanding mybusiness

Education or school fees

Buying farming expenses suchas seeds or fertiliser

Take care of member of familysick

Buying or building a dwelling tolive in

Buying land

Payment of water or power bill

Funeral expenses when needed

58

42

6

4

4

3

2

2

No money after living expenses

Do not have an income – no money to save

I do not have a bank account

Never thought about it

Don't have ID card

Don't trust in MFI

I prefer to spend money on otherthings I need more

My children will look after me so I don’t need it

*Savings for developmental reasons

Reasons for savings driven by short term needs, not longer term investments/vision [FinScope SA 2015]

40%

21%

12%

15%

13%

11%

Those with long‐term saving:

for Emergencies, for Retirement/old age, to provide for their family if they die

Emergencies

Food

Funeral costs

Education Retirement or old age

Take care of family after death

14

Those with short‐term savings:

for an Emergency, for School fees/Education, for Food

With medium‐term savings:

for an Emergency, for Food, for School fees or Education

Note that 56% of the salaries do not have long-term savings impacting negatively on retirement


Country summary

Country Key drivers for savings Key barriers to savings

Botswana 2014 To pay for living expenses, funeral and developmental reasons

Affordability: low/insufficient income

Democratic Republic of Congo Money when needed, medical, non‐medical emergencies Affordability: low/insufficient income

Lesotho 2011 To pay for living expenses, funeral and education/school fees Affordability: low/insufficient income (no money after paying living expenses, do not have money to save)

Malawi 2014 Living expenses, farming related and medical expenses Affordability: low/insufficient income

Mauritius 2014 Emergencies other than medical, living expenses, medical expenses


Mozambique 2014 Emergencies other than medical, living expenses, Affordability: low/insufficient income (no money after paying living expenses, all money goes to household pot)

Namibia 2011 *not asked *not asked

South Africa 2014 Emergencies other than medical, funeral Affordability: low/insufficient income (cannot afford itbecause used money to pay for something else)

Swaziland 2014 To pay for living expenses, emergencies and education/school fees

Affordability: low/insufficient income (low income, unemployed)

Tanzania 2013 Living expenses *not asked

Zambia 2015 To pay for living expenses, emergencies and education/school fees

Affordability: low/insufficient income (no money after paying living expenses)

Zimbabwe 2014 To pay for living expenses, emergencies and education/school fees



• South African tax‐free savings accounts

• Kenyan M‐Kesho Saving Accounts – interest rates onmobile wallets

• South African eBucks, uCount, Pick n Pay points

• Loyalty cards, voyager miles

• Self help groups (SHG) in India – encourage microsavings through the GrameenMicrosaving Initiative

Other examples of savings that ought to be encouraged to stretch the limited income


“How do you save a R10?”

‘Take care of the pennies and the pounds will take care of themselves’

Making financial markets work for the poorwww.finmark.org.za

Thank youFinMark Trust

Abel [email protected]

Tel: +27 11 315 9197http://www.finmark.org.za/finscope/

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