National Bonds pledges to combat decreasing savings sentiments

National Bonds Corporation PJSC has pledged to combat the UAE’s decreasing savings sentiments following the announcement of the results of its 2011 National Bonds Savings Index, which revealed that nine out of ten UAE residents are not confident in their current savings, and almost half of the population saved much less than they had planned to last year.

The research shows that 86% of UAE residents believe that their savings are not adequate for their future, and 46% admitted that over the past year they saved much less than they had originally planned. Furthermore, 71% of respondents said that they do not save regularly, with just under a tenth of those surveyed declaring that they have not made any attempts to save at all. Of the latter, three quarters blamed rising expenses, liabilities and loans for their inability to save.

As a result, National Bonds has pledged to launch a nationwide financial education roadshow with the aim of educating different sectors of the community on how to manage their spending and plan their savings

The National Bonds Savings Index, now in its second year, is a comprehensive study of the behavior and attitudes of people in the UAE and across the GCC towards saving and spending money. The initiative was launched in 2010 by National Bonds Corporation PJSC, the investment company behind the leading Sharia-compliant saving scheme in the region, to provide a reference point for the development of savings patterns and habits among the general public, and to better understand the reasons for these habits.

Mr. Mohammed Qasim Al Ali, Chief Executive Officer at National Bonds Corporation PJSC, said: “Last year, as part of our commitment to encourage a savings culture in the region, we launched the ground-breaking National Bonds Savings Index, which provided an unprecedented insight into the savings habits of people in the UAE and across the GCC, and gave us more data to boost the awareness about the subject of saving, its importance to the economy, and the widespread apathy towards it across the region. Our awareness campaign was widely publicized and the research results were even used by other financial institutions as a base for their own campaigns.”

“This year’s results will once again provide us with a platform to continue our mission, as we launch the second phase of our plan. We have seen that while there is a willingness to save, there is a lack of understanding of how to save. As a result of this, we are delighted to announce that we will be launching a financial education road show later this year which will aim to educate different segments of the community such as house wives on the tools they need to use to develop healthy savings habits,” he added.

The Index amalgamates responses in three key areas (respondent’s perception of their savings potential, the savings environment around them and their own financial stability in the near future) into base values that can be used as a frame of reference to measure changes in savings sentiments. The 2011 National Bonds Savings Index shows an increase in ‘savings potential’, and a decrease across all other components among UAE residents compared to 2010, with UAE Nationals and Western Expats experiencing a drop in their savings sentiments. Of the different nationality groups, Asian Expats and Arab Expats show an increase in their savings sentiments over the past year. The overall index score of 99 is a minor decrease over last year’s establishment wave (which is automatically given the value of 100 points).

Of those who do save, 64% admitted that the amount is usually less than a fifth of their income, while among UAE nationals and Arab expats specifically, 40% claim to save less than a tenth of their income. Overall the trends show that Westerners and Asians save bigger amounts saved than other segments of the society.

The worrying trend is further highlighted by the fact that respondents declared that they are spending more money than last year on everyday expenditures such as groceries (58%), transportation (40%) and household items and utilities (39%). Different Emirates show different patterns, though, with Sharjah and Abu Dhabi providing the biggest contrast. While Sharjah residents claim that they are spending more money on necessities such as groceries, household items and children’s education, Abu Dhabi residents' increasing expenditures are down to transportation, rents, eating out and buying luxury items.

National Bonds, which counts over 630,000 people in the UAE as its customers, has been vocal in its commitment to encourage a saving culture in the UAE over the past few years. The company has launched a host of creative initiatives to provide added-value to their bondholders in recent months, including a US Dollar-linked Sukuk for customers who prefer to earn Dirham returns on their savings in US Dollars, a variety of E-Channels including a Standing Instruction Order that allows customers to automatically save part of their salary in National Bonds every month, and its seamless Employee Savings Scheme.

The 2011 National Bonds Savings Index was commissioned by National Bonds Corporation PJSC and conducted in February and March 2011 by YouGov Siraj using an online interviewing mechanism, and was carried out in Arabic/English languages across a sample of 501 respondents in the UAE. Respondents were screened for age, income and bank usage for personal banking needs. The final sample split by nationality is as follows: UAE Nationals (20%); Arab Expatriates (31%), Asian Expatriates (40%) and Westerners (9%).