Low-income group in UAE save more

 

The UAE residents in the low-income group save two per cent more than the rest of the community groups in the country, says a latest National Bonds Savings Index, adding that 89 per cent of the respondents in the GCC states expected financial stability throughout the next six months.

“A majority of respondents agreed that a significant portion of their expenses were disbursed on food stuff and house rents. The study additionally indicated that 20 per cent of the GCC respondents currently saved 11-20 per cent of their overall monthly income, while four per cent of them saved 51-60 per cent of their overall monthly income,” says the study.

National Bonds Corporation’s Savings Index for the UAE and GCC indicates a noticeable increase in the prospects for saving amid an increasingly favorable financial climate in the country.

The Index includes the results of a comprehensive annual study that tracked the saving and spending habits of 1,707 UAE and GCC residents. In a departure from its previous surveys, National Bonds for the first time collated the responses of more than 200 workers with a monthly income of less than AED3,500.

Taking into account the three key factors of financial stability, potential for savings, and the existence of an enabling savings environment, the study indicated a marginal decrease of three per cent from 2012 to reach 48 per cent in the volume of savings among the residents of the UAE. The survey also showed a slight increase of one per cent from last year to reach 74 per cent in the respondents’ desire to opt for sustainable savings programs. The level of satisfaction in terms of financial stability remained unchanged from 2012, showing positive responses by 61 per cent.

The National Bonds Savings Index also revealed that 22 per cent of the respondents in the low-income category in the UAE managed to save at least 10-20 per cent of their monthly income. Thirty-one per cent of these participants are either saving regularly on a monthly basis or every three months, which is relatively higher by two per cent than the rest of the community groups in the UAE. The study also showed that four per cent of low-income participants save more than they had planned for while 49 per cent are committed to their saving plans and 48 per cent indicate no commitment to saving plans.

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CEO of National Bonds, Mohammad Qasim Al Ali, said: “Influenced by global and regional geo-political shifts, the UAE economy witnessed several fluctuations through the past five years. The scenario called for the need to build the abilities of institutions and individuals in predicting such economic fluctuations and redefining priorities to ensure a stable future.

“We are confident that the National Bonds Savings Index will stimulate public opinion and encourage organizations to seek solutions for encouraging a sustained savings habit.”

Al Ali added: “We increased the sample size of the 2013 Savings Index survey by launching the National Bonds Savings Index for low-income category in the UAE to make the study more inclusive and accurate. The index, therefore, reflects the current economic climate in the UAE communities and will serve as an important indicator of the prevailing trends in the UAE economy.”

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Summary of 2013 National Bonds Savings Index results for the residents and workers category

Country’s saving environment: The UAE recorded the most positive saving environment in the region at 26%. 14% of respondents in the UAE indicated that 2013 was not a good time to save while 38% remained neutral. 6% said that this was a good time to save.
Savings potential: 59% of National Bonds’ customers said they planned to start saving in the next six months. 61% of the existing savers in the UAE planned to save more in the next six months, 37% of the non-savers planned to begin saving, while 12% said they do not plan to save in the next six months.
Variations in personal priorities: 57% of the UAE respondents indicated that house rents were major expenses impacted by inflation, followed by educational expenses at 51% and medical expenses at 46%.
Factors that impact selection of savings instruments by employees: Top factors in the UAE included attractive annual returns, shariah compliance and good reputation of the provider.
Reason for saving: In the UAE, the number one reason for saving was retirement, followed by educational expenses of children and purchase of property for personal use. Uncertain employment in the future and children’s future education expense requirements were the top two drivers of savings.
Usage of credit card: In the UAE, 34% of residents admitted to an increase in the usage of credit cards, while 24% said they did not own credit cards.
66% UAE residents used remittance services, while 65% remitters preferred exchange houses as compared to 16% that opted for banks. 43% of respondents indicated they transfer funds out of the country on a monthly basis, while 12% indicated they use remittances twice or three times a month, and 12% reported to remitting funds twice or three times a year.
As for the low-income category, the results of the study showed that cash is the most commonly used means of saving according to 47% of the low-income participants while 22% opt for remittances.

The index highlighted that the top factor taken into consideration when choosing a savings instrument is its conformity to Shariah or Islamic principles. To read the full National Bonds Savings Index report, please click here.

Mohammad Qasim Al Ali

National Bonds CEO Mohammad Qasim Al Ali

 

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