south african baseline study on financial...
TRANSCRIPT
Regional Dissemination Conference on Building Financial Capability
30-31 January 2013
Nairobi, Kenya
South African Baseline Study
on Financial Literacy
Lyndwill ClarkeHead: Consumer Education
Outline
• Why a baseline study
• Measurement challenges in SA
• From OECD Pilot to FSB Baseline (The Questionnaire)
• Study methodology (Sampling)
• Some Findings
• Findings per Domain
• How to use findings
• Way forward
2
3
Why a Baseline Study
• Develop and implement a survey of financial literacy of adults in South Africa consistent with emerging measurement best practice internationally
• Identifying potential needs and gaps and groups at risk
• Developing a composite financial literacy score for monitoring purposes
• Inform the elements of a National Strategy for SA
• OECD Financial literacy definition:
“a combination of awareness, knowledge, skills, attitude and behaviours necessary to make sound financial decisions and ultimately achieve
individual financial wellbeing”
4
• Heterogeneous Middle Income Country (MIC) with one of world’s highest income inequality levels
– apartheid history and inequality of opportunity
• Trends in International Mathematics and Science Study (TIMSS) 2003: South African students’ maths and sciences scores ranked lowest of 50 countries surveyed (Reddy 2006)
Measurement Challenges in SA
68 60
36 3511 19
4 30
20406080
100Poverty level, 2008 (%)
South African average poverty headcount (54%)
First and third world economies in SA
Poverty: 54% below national poverty line in 2008; large disparities by race (Leibbrandt et al. OECD 2010)
Labour market: vast inequalities that characterize both access to and the quality of employment.
Unemployment : 24% (Q4, 2010) – 28% (black) vs. 6% (white)
From Pilot to Baseline Study
Behaviour9 Q
Keeping track of money
Making ends meet
Choosing and using products
Short and long term planning
Knowledge8 Q
Simple and compound
interest
Inflation-time value of
money
Risk and return
Risk diversification
Attitudes4 Q
Propensity to save vs
spend
Time preference (present vs
future)
Risk preference
(explanatory variable)
Financial inclusion
Awareness of products
Holding and using
products
Savings habits
Socio-demographic information
Age
Gender
Education
Work
Income
5
OECD Questionnaire Content
FINANCIALCONTROL
8(23)
FINANCIAL PLANNING
5(18)
PRODUCTS CHOICE
12(63)
FINANCIAL KNOWLEDGE
8 (35)
Questionnaire Transformation
BEHAVIOUR
9
ATTITUDE
4
KNOWLEDGE
8
FINANCIAL INCLUSION
FINANCIAL CONTROL
23Q
Personal Money
Management
Meeting Financial
Needs
Household Budgets
Long-term Financial
Goals
FINANCIAL PLANNING
18 Q
Financial Reserve Funds
Emergency Financial Planning
Propensity to Save vs Spend
Retirement Planning
PRODUCTS CHOICE
63 Q
Awareness of Products
Holding Products
Choosing and Using products
Selecting Advice Givers
FINANCIAL KNOWLEDGE
35 Q
Simple and Compound
Interest
Inflation-time Value of Money
Risk, Diversification
and Return
Self-Rated Knowledge
SOCIO-DEMOGRAPHIC
Age
Rural/Urban
Living std.
Province
Language
Gender
Education
Work
Income
FSB Questionnaire Content
ANALYTICAL GUIDELINES FOLLOWED TO
CONSTRUCT THE INDEXFinancial control
• Q1; Q5; Q16-Q18; Q27; Q29; Q38 (8 Questions)
Financial planning
• Q19; Q32; Q35; Q36; Q70 (5 Questions)
Choosing products
• Q42-Q43;Q51-Q52;Q64-Q65;Q71-Q72;Q98-Q100; Q102 (12 Questions)
Financial Knowledge
• Q108-Q115 (8 Questions)
The theoretical conceptual framework used in this study was derived from the OECD which specifies certain questions to be used in order to be able to determine scores.
In measuring financial literacy in the various domains, certain questions had to be isolatedand included as core measures.
Each subgroups of question was converted to a 0-100 scale to enable the researchers to compare and plot findings of the various domains on a single platform.
www.fsb.co.za
Financial
Literacy
Financial
control
Financial
planning
Choosing
financial
products
Knowledge &
understanding
Baseline Study Domains
10
Study Methodology• Survey conducted by Human Sciences Research Council
(HSRC)
• Nationally representative of the population 16 years and older living in private households in the 9 provinces– Primary sampling units: 500 census enumerator areas (EAs), stratified
by province, geography type and majority population group
– Secondary sampling units: 7 household visiting points randomly selected per EA
– One respondent 16+ years randomly selected per household
• Of 3,500 addresses issued 2,972 interviews achieved
• Responses to the survey voluntary and confidential, collected by face-to-face interview
• Data collection: September-October 2011
11
Findings: Managing Money
Making ends meet
44% personally experienced income shortfalls in the previous year
Two common coping responses: borrowing from family/friends (57%); cutting back on spending or doing without (36%) – nominal reliance of financial products.
48% find it difficult to cover expenses and pay bills in a typical month.
Attitudes to saving and spending
South Africans have a broadly favourable view of their approach to financial management – tend not to make impulsive purchases, pay bills on time, closely watch personal finances.
36% experienced lack
of food to eat
39% went without
necessary medicine or treatment
38% no energy
source to cook food
12
Findings: Financial planning
Forms of savings in last year (multiple response):% of
cases
Saving cash at home or in your wallet 30%
Paying money into a savings account 26%
Building up a balance of money in your bank account 19%
Saving in a stokvel or other informal savings club 11%
Giving money to family to save on your behalf 9%
Buying financial investment products, other than pension funds
5%
Or saving in some other way (including remittances, buying livestock or property)
4%
None of the above 6%(Do not know) 17%(Refused to answer) 8%
Question producedconsiderable item
non-response
(25%)
Significant majority saved in at least
one type of savings instrument
those with no schooling
and rural residents
60% among those with low
living standards, low education
and rural dwellers.
13
Findings: Retirement Planning
2
10
2
1
2
3
3
4
6
8
9
10
13
23
33
48
0 20 40 60
(Refused)
(Don’t know)
Other
Sell financial assets
Sell non-financial assets
Drawing income from own business
Moving to a cheaper property in same…
Moving to a cheaper area
Use inheritance
Financial support from wider family
Financial support from spouse / partner
Financial support from children
Continue to work after retirement age
Personal retirement savings plan
Work-place pension
Government old age pension
Options included in financial plan for retirement (% of cases)
27% Relying on
family members
48%adults plan to
draw on a government
pension
13% recognise the need to work
beyond retirement age
24
2
2
2
3
3
3
9
9
5
13
6
10
12
6
6
11
12
10
12
29
45
1
33
38
38
41
41
42
42
47
48
49
49
51
51
55
62
65
68
72
72
76
86
0 10 20 30 40 50 60 70 80 90
None of the above
Unit trusts
Savings book at bank
Shares on stock exchange
Informal money guard
Home loan from big bank
Garage / petrol card
Retirement annuity
Investment / savings policy
Fixed deposit bank account
Debit card / Cheque card
Provident fund
Keep cash / savings at home
Current / Cheque account
Education policy / plan
Post Office savings account
Credit Card
Stokvel / savings club
Mzansi account
Pension fund
ATM card
Savings account
Heard of productsCurrently holds
14
Choosing savings and investment products
Awareness
Relatively good awareness of very basic bank products; low awareness of other formal products such as shares and unit trusts.
Significant respondents have banking products, but relatively low holding of other products
Product holding
15
Choosing insurance products
2
44
1
2
3
2
5
6
8
5
9
13
9
19
16
12
16
1
4
16
21
35
40
42
44
50
52
53
56
61
64
67
68
69
0 20 40 60 80
Don't know / Refused
None of the above
Funeral cover from any other source
Funeral cover from an spaza shop or stokvel
Insurance that pays your loan or borrowing when you die
Disability insurance or cover
Homeowners’ insurance on building or house structure
Funeral policy with a bank - including Post Bank
Funeral policy with an insurance company
Hospital cash plan
Household content insurance
Funeral cover through undertaker/funeral parlour
Cellphone insurance
Belong to a burial society
Medical aid scheme
Vehicle or car insurance
Life insurance or life cover
Heard of productsCurrently hold
40%of adult South
Africans have some form of funeral
insurance (formal or informal)
16
Financial AdviceNormal source of financial advice
• 26% ask friends
• 18% approach banks, 4% independent brokers, and 13% other financial advisors
• Large difference by living standard:
– Poor are more reliant on family, friends and informed community members.
Getting quality advice
• 65% report no problem getting relevant and good advice; 8% experience difficulty;
Recent advice from financial professional
• 78% did not seek professional financial advise in the last year
• 13% sought advice on savings /investments and 8% in relation to insurance.
35%ask professionals
18% do not ask anyone
for help
1 % In low LSM rely on
independent brokers compared to
27% in high LSMs
50% ask family members
17
Financial Control Domain
Someone with high financial control tends to be involved in daily financial decision-making processes, exhibits
careful approach to personal finances, prefers saving over spending money, and lives in a household that budgets
and is able to make ends meet.
18
Financial Control Domain Score - 58
0
10
20
30
40
50
60
70
80
MaleFemale
16-19 years20-29 years
30-39 years
40-49 years
50-59 years
60-69 years
70+ years
Black African
Coloured
Indian
White
Married (customary only)
Married (civil only)
Married (both customary & civil)
Widow/widower
Divorced/separated
Never married
Low living standard
Medium living standard
High living standardNo schooling
PrimarySome secondaryMatric or equivalent
TertiarySelf-employed (30 hours+/week)Self-employed (<30 hours/week)
Paid employment (30 hours+/week)
Paid employment (<30 hours/ week)
Looking for work
Looking after the home
Unable to work
Retired
Student
Not working, not looking
Urban formal
Urban informal
Rural, trad. auth. areas
Rural farms
Western Cape
Eastern Cape
Northern Cape
Free State
KwaZulu-Natal
North WestGauteng
MpumalangaLimpopo
Financial control South African avg. (M=58)
19
Financial Planning Domain
Someone with a high financial planning score tends to set financial goals and work hard to meet them, prefers to save for the long term and worries about tomorrow, has emergency funds in place and has managed to save recently (through a formal savings product or informal
means).
0
10
20
30
40
50
60
70
80Male
Female16-1920-29
30-3940-49
50-59
60-69
70+
Black African
Coloured
Indian
White
Married (customary only)
Married (civil only)
Married (both)
Widow/widower
Divorced/separated
Never married
Low living std.
Medium living std.High living std.
No schoolingPrimarySome secondary
MatricTertiarySelf-employed (30 hrs+/week)
Self-employed (<30 hrs/week)Paid employment (30 hrs+/week)
Paid employment (<30 hrs/week)
Looking for work
Looking after home
Unable to work (illness)
Retired
Student
Not working, not looking
Urban formal
Urban informal
Rural, trad auth areas
Rural farms
WC
EC
NC
FS
KZNNW
GPMP LP
Financial Planning South African avg. (M=53)
20
Financial Planning Domain Score - 53
21
Product Choice Domain
A higher product choice score is given to someone ....
– with a broad awareness of different types of banking, credit/loan, savings and investment, and insurance products;
– holding at least one of each of the four product types mentioned above;
– who believes they have a clear understanding of their product needs and who undertakes detailed research before choosing a product;
– who has no regrets about recent financial product decisions (last year) and who has not taken an unsuitable product (last 5 years)
22
Product Choice Domain Score - 45
0
10
20
30
40
50
60
70Male
Female16-1920-29
30-3940-49
50-59
60-69
70+
Black African
Coloured
Indian
White
Married (customary only)
Married (civil only)
Married (both)
Widow/widower
Divorced/separated
Never married
Low living std.
Medium living std.High living std.
No schoolingPrimarySome secondary
MatricTertiarySelf-employed (30 hrs+/week)
Self-employed (<30 hrs/week)Paid employment (30 hrs+/week)
Paid employment (<30 hrs/week)
Looking for work
Looking after home
Unable to work (illness)
Retired
Student
Not working, not looking
Urban formal
Urban informal
Rural, trad auth areas
Rural farms
WC
EC
NC
FS
KZNNW
GPMP LP
Product Choice South African avg. (M=45)
23
Financial Knowledge and Understanding Domain
Someone with high financial knowledge and understanding has a familiarity with most or all of the basic financial concepts as well as
the concepts below:
– Basic mathematical division
– Effects of inflation
– Interest paid on loans
– Interest on deposits
– Compound interest
– Risk of high return investments
– Effects of inflation on cost of living
– Risk diversification
24
Knowledge and Understanding Domain Score - 56
0
10
20
30
40
50
60
70
80Male
Female16-1920-29
30-3940-49
50-59
60-69
70+
Black African
Coloured
Indian
White
Married (customary only)
Married (civil only)
Married (both)
Widow/widower
Divorced/separated
Never married
Low living std.
Medium living std.High living std.
No schoolingPrimarySome secondary
MatricTertiarySelf-employed (30 hrs+/week)
Self-employed (<30 hrs/week)Paid employment (30 hrs+/week)
Paid employment (<30 hrs/week)
Looking for work
Looking after home
Unable to work (illness)
Retired
Student
Not working, not looking
Urban formal
Urban informal
Rural, trad auth areas
Rural farms
WC
EC
NC
FS
KZNNW
GPMP LP
Knowledge & understanding South African avg. (M=56)
25
Overall Financial Literacy Score
0
10
20
30
40
50
60
70
80South Africa
Male Female16-19
20-2930-39
40-49
50-59
60-69
70+
Black African
Coloured
Indian
White
Married (customary only)
Married (civil only)
Married (both)
Widow/widower
Divorced/separated
Never married
Low living std.Medium living std.
High living std.No schooling
PrimarySome secondaryMatricTertiarySelf-employed (30 hrs+/week)
Self-employed (<30 hrs/week)Paid employment (30…
Paid employment (<30…
Looking for work
Looking after home
Unable to work (illness)
Retired
Student
Not working, not looking
Urban formal
Urban informal
Rural, trad auth areas
Rural farms
WC
EC
NC
FS
KZNNW
GPMP LP
Overall Financial literacy score Financial Control Financial Planning Product Choice Knowledge
26
Using the Financial Literacy Survey to help design tailored interventions
Example A: 16-19 year-olds
Higher than average knowledge domain score but lower than average on other three domains due to lifecycle effect
Need to make sure this cohort receives targeted financial education messaging through schools about…
…financial control and money management
…planning for the future
…making informed and appropriate product decisions
Ensure that bring about cohort effect that increases societal financial literacy and well-being over time
Equipping youth with financial knowledge and skills so that, as they make the transition into adulthood, they are able to make informed choices to improve their long-run financial well-being
Financial Literacy in SA
27
FINANCIAL
LITERACY
54
Financial
Control
58
Financial
planning
53
Choosing
financial
products
45
Knowledge &
understanding
56
28
Baseline Study & National Strategy
Financial Education Policy and Strategy: Risk-based approach Survey data and measures assist in evidence-based policy-making
by….
…identifying target groups
…helping to design initiatives tailored to these groups
Also assisted to:
Show which socio-demographic groups are being reached
Which messages are getting through to risk groups
Way forward Repeat every 5 years,
Annual monitoring using 35 core questions as part of South African Social Attitudes Survey (SASAS)
