11 years of consumer financial education in South Africa
Measuring Financial Literacy and Capability: Diagnostic Tools to Support Policy Development
Mr Lyndwill ClarkeHead: Consumer EducationRitz-Carlton Hotel Moscow
13 June 2013
11 years of consumer financial education in South Africa
Measurement of Financial Literacy in RSA
Before 2010 – Evaluation per project and programme
2010 OECD Pilot Study
2011 Baseline Study
2012 SASAS
2
11 years of consumer financial education in South Africa
Why Measure Financial Literacy?
• Set a baseline – needs/gap analysis
• Influence policies, strategy and programme design
• Impact assessment
• (TO SEE IF CFE WORKS?)
3
Financial Planning
Knowledge & under-standing
Choosing financial products
Financial Control
Financial Literacy
11 years of consumer financial education in South Africa 4
BEHAVIOUR 9 Q
Keeping track of money
Making ends-meet
Choosing & using
financial products
Short & Long-term planning
KNOWLEDGE 8 Q
Simple & compound
interest
Inflation time value of money
Risk and return
Risk diversification
ATTITUDES
4 Q
Propensity to save vs
spend
Time preference (present vs
future)
Risk preference
(explanatory variable)
FINANCIAL
INCLUSION
Awareness of products
Holding and using
products
Saving habits
SOCIO-DEMOGRAPHIC INFORMATION
Age
Gender
Education
Work
Income
OECD Questionnaire Content
11 years of consumer financial education in South Africa 5
Financial control
8(23)
Financial planning
5(18)
Products choice
12(63)
Financial knowledge
8 (35)
From Pilot to Baseline to Annual Study
BEHAVIOUR
9
ATTITUDE
4
KNOWLEDGE
8
FINANCIAL INCLUSION
Financial control
8
Financial planning
5
Products choice
12
Financial knowledge
8
ANNUAL SURVEYOECD PILOT
SA BASELINE
11 years of consumer financial education in South Africa
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 2,518 (2,972 – 2011) interviews
achieved• Responses to the survey voluntary and confidential, collected by
face-to-face interview• Data collection: November-December 2012
6
11 years of consumer financial education in South Africa
Financial control
7
Eight indicators: OECD PILOT2010
BASELINE 2011
SASAS 2012
Indicator 1 • Personal involvement in daily household money management
Indicator 2 • Presence of a household budget
Considered Approach to Personal Finances
Indicators 3-5
• Careful spending• Paying bills timeously• Closely monitoring financial
matters
Making Ends Meet
Indicators 6-7
• Making ends meet• Main coping response
Indicator 8 • Preference for spending or saving
11 years of consumer financial education in South Africa
Making Ends Meet
• 45% personally experienced income shortfalls last year
– Little difference in response between 2010 and 2012.
• Two common coping responses: borrowing from family/friends (41%); cutting back on spending or doing without (43%) – nominal reliance of financial products.
– Increase in the share of South Africans cutting back on spending as a coping strategy between 2012 (43%), 2011 (35%) and 2010 (30%).
– Decline in the share of South Africans borrowing from family/friends as a response to income shortfall between 2012 (41%) and 2011 (55%).
• Most important coping mechanism for South Africans is cutting back on expenditure or doing without (31%)
– This was primarily a coping strategy is more common among middle income South Africans; the poor are more reliant on social networks
8
11 years of consumer financial education in South Africa
Financial Control Domain Score (2011, 2012)
Male Female16-19 years
20-29 years
30-39 years
40-49 years
50-59 years
60-69 years
70+ years
Black African
ColouredIndian
WhiteLow living standardMedium living standard
High living standard
No schooling
Primary
Some secondary
Matric or equivalent
Tertiary
Urban formal
Urban informal
Rural, trad. auth. areasRural farms
0
50
100
2012 2012 National Average (61)2011 2011 National Average (58)
11 years of consumer financial education in South Africa 10
Financial Planning
Five indicators: OECD PILOT2010
BASELINE 2011
SASAS 2012
Indicator 9 • Tends to set and strive to achieve long- term financial goals
Indicator 10 • Has emergency funds or rainy day funds
Indicators 11 • Preference for spending money vs long-term saving
Indicators 12 • Living for today vs long-term provision
Indicator 13 • Saved money in the last 12 months
11 years of consumer financial education in South Africa
Savings Behaviour
11
2010 2011 2012
Paying money into a savings account 32 28 23
Saving cash at home or in your wallet 22 32 20
Building up a balance of money in your bank account 17 20 16
Saving in a stokvel or any other informal savings club 9 11 7
Giving money to family to save on your behalf 9 10 6
Buying financial investment products, other than pension funds 3 5 4
Or saving in some other way (remittances, buying livestock or property)
2 5 3
None of the Above 26 31 50
Significant majority saved in at least one type of savings instrument Signs of declining ability to save over last 3 years
11 years of consumer financial education in South Africa
Behaviour and Attitudes to long-termplanning
• 52% of the adult population always/often sets and pursues long-term
financial goals; 22% sometimes; 22% doing so seldom or never.
• 39% find it more satisfying to spend money than to save it for the long term
(45% preferred saving and 13% remained neutral)
• 29% reported that they tend to live for today and let tomorrow take care of
itself (53% preferred to plan for tomorrow; 18% remained neutral)
• 42% believed that money is there to be spent (37% preferred to save and
21% remained neutral).
Attitudes have not changed appreciably since 2010.
but Signs of declining ability to save over last 3 years
12
11 years of consumer financial education in South Africa
Financial Planning Domain Score (2011, 2012)
Male Female16-19 years
20-29 years
30-39 years
40-49 years
50-59 years
60-69 years
70+ years
Black African
ColouredIndian
WhiteLow living standardMedium living standard
High living standard
No schooling
Primary
Some secondary
Matric or equivalent
Tertiary
Urban formal
Urban informal
Rural, trad. auth. areasRural farms
0
50
100
2012 2012 National Average (50)2011 2011 National Average (53)
11 years of consumer financial education in South Africa 14
Appropriate product choice
Twelve indicators: OECD PILOT2010
BASELINE 2011
SASAS 2012
Product awareness
Indicators 14 -17
• Banking products• Credit and loan products• Investment and Savings Products • Insurance Products
Product holding
Indicators 18-21
• Banking products • Credit and loan products• Investment and Savings Products • Insurance Products
Financial product decision making
Indicators 22-23
• Have clear idea of product need • Informed Product choice
No Experience of regret about recent financial product choice
Indicators 24-25
• Does no Regret any Key Financial decisions made in the last year
• Did not Pay for Unsuitable product in the last five years
11 years of consumer financial education in South Africa
Banking Products
11 years of consumer financial education in South Africa
Main Non-Banking Products
Keep Cash at Home
Funeral cover (undertaker)
Household Insurance
Loan from Friends or Family
Stokvel/Umgalelo/Savings Club
Medical Aid Scheme
Belong to a burial society
Life Insurance
Lay-Bye
Pension Fund
Vehicle or Car Insurance
Store Card
0 10 20 30 40 50 60 70 80 90
13
14
11
10
13
13
23
16
10
12
12
22
46
54
55
56
59
60
60
64
65
66
66
78
Awareness Holding
11 years of consumer financial education in South Africa
Product Choice Domain Score (2011, 2012)
Male Female16-19 years
20-29 years
30-39 years
40-49 years
50-59 years
60-69 years
70+ years
Black African
Coloured
IndianWhiteLow living standard
Medium living standard
High living standard
No schooling
Primary
Some secondary
Matric or equivalent
Tertiary
Urban formal
Urban informal
Rural, trad. auth. areasRural farms
0
50
100
11 years of consumer financial education in South Africa 18
Financial knowledge and understanding
Eight indicators: OECD PILOT2010
BASELINE 2011
SASAS 2012
Indicator 26 • Basic mathematical division
Indicator 27 • Effects of inflation
Indicators 28 • Interest paid on loans
Indicators 29 • Interest on deposits
Indicator 30 • Compound Interest
Indicator 31 • Risk of high return investments
Indicator 32 • Effects of inflation of cost of living
Indicator 33 • Risk diversification
11 years of consumer financial education in South Africa
Trend and Subgroup Differences on the Financial Quiz
• BASIC ARITHMETIC: 2010 only four-fifths answered the question correctly compared
with almost nine out of ten (86%) in 2012.
• UNDERSTANDING OF INFLATION: more people answered this question incorrectly in
2012 when compared with 2011.
• UNDERSTANDING OF INTEREST AND COMPOUND INTEREST: the share
answering this question correctly did not change significantly over the period.
– The share giving an incorrect answer on the interest rate question and compound
interest question was greater in 2012 than in 2011 and 2010.
19
11 years of consumer financial education in South Africa
Financial Knowledge Domain Score(2010-2012)
Male Female16-19 years
20-29 years
30-39 years
40-49 years
50-59 years
60-69 years
70+ years
Black African
Coloured
IndianWhiteLow living standard
Medium living standard
High living standard
No schooling
Primary
Some secondary
Matric or equivalent
Tertiary
Urban formal
Urban informal
Rural, trad. auth. areasRural farms
0
50
100
2012 2012 National Average (55)2011 2011 National Average (56)
11 years of consumer financial education in South Africa 21
Overall Scores, 2011-2012 and Composite measure
Financial Planning
Appropriate Product Choice
Financial Knowledge & Understanding
Overall Financial Literacy Score
Financial Control
2012
2011
2012
2011
2010
2012
2011
2012
2011
2012
2011
0 10 20 30 40 50 60 70
54
54
55
56
55.99115
46
45
50
53
61
58
11 years of consumer financial education in South Africa
Way forward
22
• Repeat core financial literacy core module year-on-year
• Next Baseline study – 2016• Challenge: Integrating programme and project survey
and M & E statistics into Baseline and Annual survey
11 years of consumer financial education in South Africa
THANK YOU FOR YOUR ATTENTION
23
Mr Lyndwill Clarke
HOD: Consumer Education
Financial Services Board – South Africa
E-mail: [email protected]
Tel: (+27) 12 422 2819
Mobile: (+27) 79 881 1805
www.fsb.co.za
www.mylifemymoney.co.za
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