Fifty percent savers stash cash at home in Pakistan: report

KARACHI: Around 50 percent of (surveyed) savers in Pakistan stash their savings at home in the form of cash, avoiding banking system altogether, thus denying themselves any interest or returns, a Standard Chartered Plc study showed on Monday. 

 In its report titled “Emerging Affluent—The Race to Save”, the Standard Chartered revealed that 38 percent of the Pakistani savers, who were surveyed by the multinational British banking company, rely on the most common basic savings methods, while four percent use more advanced means to save their money. 

Basic savings methods include: savings accounts, time deposits/fixed-term deposits and regular deposit savings plans. However, advanced methods for savings are mutual funds, stocks, fixed income and pensions.  

The 58 percent of emerging affluent savers in the country consider themselves close to reaching their savings goals, while 17 percent say they are far from achieving their main priorities. 

“The emerging affluent survey has given us interesting insights into the saving habits of people in Pakistan,” Shezad Arif, head of retail banking at Standard Chartered Pakistan, said, while launching the report. 

“On an average the country’s emerging affluent saves 14 percent of their income every month. Financial institutions should take a broader approach and introduce innovative wealth management solutions to help this segment achieve their saving goals.” 

The report also showed that almost 20 percent of Pakistani savers believed low interest rates as a barrier to saving more. While the vast majority of the emerging affluent (96 percent) in Asia do save; however, many say that low interest rates discourage them from saving more than they currently do.

This sentiment is felt strongest in China (39 percent), Korea (38 per cent), Taiwan (38 percent) and India (32 percent). The report added that emerging affluent consumers in Asia could boost their savings by an average of 42 percent if they move from a basic savings approach to a low-risk wealth management strategy. 

The emerging affluent are consumers who are earning enough to start saving – and investing – and that’s what makes them a crucial engine of economic growth. 

The study also revealed how this rising consumer class is losing out on savings as a result of an overly simplistic approach to their personal finances; in some cases, cash is sitting under mattresses instead of in bank accounts. 

While the emerging affluent are ‘active’ savers, with two in three (67 percent) putting money aside every month, the majority are using basic products – savings accounts and fixed-term deposits – to reach their financial goals. 

A switch to a more effective approach could make a huge difference. Consumers in Hong Kong, Singapore, India, and Taiwan could increase their savings by as much as 86 percent, 52 percent, 48 percent, and 43 percent respectively over 10 years. 

The study of 8000 emerging affluent consumers across eight markets in Asia and Africa also found that homeownership and children’s education are top savings priorities for most individuals – ahead of retirement. Saving for life after work only comes out on top for the 45-55-year-olds, except in India, Kenya and Pakistan, where children’s education is the priority for almost all age groups. 

The emerging affluent are saving regularly but their confidence seems to be slipping.

At the end of 2016, fewer emerging affluent consumers in China, Kenya, Hong Kong, India and Singapore were confident in reaching their savings goals (72 percent), compared to 83 percent in 2015. 

The report also stated that digital banking tools have a good following among the emerging affluent, with more than half (54 percent) saying they use them at least sometimes and almost a quarter (23 percent) using them frequently. The latter save, on average, eight percent more of their income than those who use digital tools less often or don’t use at all.

When it comes to digital uptake, China stands out. Chinese emerging affluent are the most likely to use digital tools and services frequently (47 percent) and get expert money advice on social media (37 percent). 

They are also the most entrepreneurial-minded. A quarter (25 percent) cites funding a business as a top three priority, rising to one-third (32 percent) among millennials (aged 25 to 34).