Measuring Financial Literacy and Capability:
Diagnostic Tools to Support Policy Development
Mr Lyndwill Clarke
Head: Consumer Education
Ritz-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
11 years of consumer financial education in South Africa
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Why Measure Financial Literacy?
Financial
Control
Financial
Planning
Financial
Literacy
Choosing
financial
products
• Set a baseline – needs/gap analysis
Knowledge
& understanding
• Influence policies, strategy and programme
design
• Impact assessment
•
(TO SEE IF CFE WORKS?)
11 years of consumer financial education in South Africa
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OECD Questionnaire Content
11 years of consumer financial education in South Africa
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From Pilot to Baseline to Annual Study
OECD PILOT
SA
BASELINE
ANNUAL
SURVEY
BEHAVIOUR
Financial control
Financial control
9
8(23)
8
KNOWLEDGE
Financial
planning
Financial
planning
8
5(18)
5
Products choice
Products choice
12(63)
12
Financial
knowledge
Financial
knowledge
8 (35)
8
ATTITUDE
4
FINANCIAL
INCLUSION
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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
11 years of consumer financial education in South Africa
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Financial control
OECD PILOT
2010
Eight indicators:
Indicator 1
• Personal involvement in daily
household money management
Indicator 2
• Presence of a household budget
BASELINE
2011
SASAS 2012
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
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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
11 years of consumer financial education in South Africa
8
Financial Control Domain Score
(2011, 2012)
Rural farms
Rural, trad. auth.…
Urban informal
Urban formal
Tertiary
Matric or equivalent
Male
80
70
Female
16-19 years
20-29 years
60
50
30-39 years
40
30
40-49 years
20
10
50-59 years
0
Some secondary
60-69 years
Primary
70+ years
No schooling
High living standard
Medium living…
Low living standard
Black African
White
Coloured
Indian
2012
2012 National Average (61)
2011
2011 National Average (58)
11 years of consumer financial education in South Africa
Financial Planning
Five indicators:
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
OECD PILOT
2010
11 years of consumer financial education in South Africa
BASELINE
2011
SASAS
2012
10
Savings Behaviour
Paying money into a savings account
Saving cash at home or in your wallet
Building up a balance of money in your bank account
Saving in a stokvel or any other informal savings club
Giving money to family to save on your behalf
Buying financial investment products, other than pension funds
Or saving in some other way (remittances, buying livestock or
property)
None of the Above


2010
2011
2012
32
22
17
9
9
3
2
28
32
20
11
10
5
5
23
20
16
7
6
4
3
26
31
50
Significant majority saved in at least one type of savings instrument
Signs of declining ability to save over last 3 years
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Behaviour and Attitudes to long-term
planning
•
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
11 years of consumer financial education in South Africa
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Financial Planning Domain Score
(2011, 2012)
Male
Rural farms
Rural, trad. auth. areas
Urban informal
Urban formal
Tertiary
80
70
Female
16-19 years
20-29 years
60
50
30-39 years
40
30
40-49 years
20
10
Matric or equivalent
50-59 years
0
Some secondary
60-69 years
Primary
70+ years
No schooling
High living standard
Medium living standard
Low living standard
2012
2012 National Average (50)
Black African
White
Coloured
Indian
2011
2011 National Average (53)
11 years of consumer financial education in South Africa
Appropriate product choice
OECD PILOT
2010
Twelve indicators:
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
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Banking Products
11 years of consumer financial education in South Africa
Main Non-Banking Products
Store Card
78
22
66
Vehicle or Car Insurance
12
66
Pension Fund
12
65
Lay-Bye
10
64
Life Insurance
16
60
Belong to a burial society
23
60
Medical Aid Scheme
13
59
Stokvel/Umgalelo/Savings Club
13
56
Loan from Friends or Family
10
55
Household Insurance
11
54
Funeral cover (undertaker)
14
46
Keep Cash at Home
13
0
20
Awareness
40
Holding
11 years of consumer financial education in South Africa
60
80
100
Product Choice Domain Score
(2011, 2012)
Male
Rural farms
Rural, trad. auth. areas
Urban informal
70
60
Female
16-19 years
20-29 years
50
40
Urban formal
30-39 years
30
Tertiary
40-49 years
20
10
Matric or equivalent
50-59 years
0
Some secondary
60-69 years
Primary
70+ years
No schooling
High living standard
Medium living standard
Low living standard
Black African
Coloured
White
Indian
11 years of consumer financial education in South Africa
Financial knowledge and
understanding
OECD PILOT
2010
Eight indicators:
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
BASELINE
2011
SASAS
2012
18
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.
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Financial Knowledge Domain Score
(2010-2012)
Rural farms
Rural, trad. auth. areas
Urban informal
Urban formal
Tertiary
Matric or equivalent
Male
80
70
Female
16-19 years
20-29 years
60
50
30-39 years
40
30
40-49 years
20
10
50-59 years
0
Some secondary
60-69 years
Primary
70+ years
No schooling
High living standard
Medium living standard
Low living standard
2012
2011
Black African
White
Coloured
Indian
2012 National Average (55)
2011 National Average (56)
11 years of consumer financial education in South Africa
Overall Scores, 2011-2012 and
Composite measure
Financial Control
58
2011
61
2012
Financial
Planning
53
2011
50
2012
Appropriate
Product Choice
2011
Financial
Knowledge &
Understanding
2010
56
2011
56
45
46
2012
55
2012
Overall Financial
Literacy Score
2011
54
2012
54
0
10
20
11 years of consumer financial education in South Africa
30
40
50
60
70
21
Way forward
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THANK YOU FOR YOUR ATTENTION
Mr Lyndwill Clarke
HOD: Consumer Education
Financial Services Board – South Africa
E-mail: Lyndwill.Clarke@fsb.co.za
Tel: (+27) 12 422 2819
Mobile: (+27) 79 881 1805
www.fsb.co.za
www.mylifemymoney.co.za
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