FinScope Consumer Survey Namibia 2012 Ministry of Finance Windhoek, Namibia 8 March 2012 Christiaan Keulder and Dr Kammy Naidoo FinScope Consumer Survey Namibia 2012 Ministry of Finance Windhoek, Namibia 8 March 2012 Christiaan Keulder and Dr Kammy Naidoo 1
Contents Introduction and background Methodology of the study Understanding people s lives Financial inclusion Financial capability Conclusion Introduction and background 2
FinMark Trust s FinScope research What FinScope Consumer Surveys Nationally representative study of demand for, usage of, and access to financial services Where 16 African countries, as well as Pakistan Objective for FinScope Namibia To measure and profile levels of access to and use of financial services by all adults aged 16 years and older, across income ranges and other demographics Partnering for a common purpose FinScopeNamibia follows a syndicate-funded approach. The syndicate members form an integral part in the survey questionnaire design and offer other valuable insights into consumer demand behaviour. Republic of Namibia MINISTRY OF FINANCE 3
Methodology of the study Overview Logistics Methodology Sampling frame Details Face-to-face, pen and paper interviews were conducted among adults in Namibia (16 years and older) Listing exercise, population stratified by location (urban/rural) Sample area selection 150 Enumerator Areas (EAs) were selected using probability proportional to size (PPS), interviews were conducted in 56 urban and 94 rural EAs Sample size Household qualification 1200 interviews, nationally representative sample 8 households were selected from each EA using systematic random sampling Respondent selection Final respondent to interview was selected using the Kish Grid method Questionnaire length ±75 minutes Fieldwork November 2011 to January 2012 Data management 20% back checks, data capturing in SPSS, weighting was done on EA, household and individual level, data validation against census data 4
Weighting methodology 2004 and 2007 weighting was done using the projected national population of 2006 The 2004 data was only weighted in 2007, using the same population projections as a basis for weighting Given that a household listing was conducted in 2011, the National Planning Commission (NPC) used listing figures as a basis of computing the weights for households and individuals In order to verify the weights, the resultant weights were compared to the 2009/2010 National Household Income and Expenditure Survey (NHIES) surveythatwasconducted bythenpc Slight adjustments were made to the weights computed from the household listings conducted by Survey Warehouse, given that the NHIES sample was much bigger, more EAs were covered, and therefore provided more accurate population data as a basis for weighting Understanding people s lives 5
Demographic characteristics Age Education 75+ 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 16-19 2 3 4 4 3 4 6 8 11 10 5 10 15 15 15 Tertiary/post Secondary Incomplete post secondary Secondary school completed Incomplete secondary school Primary school completed Incomplete primary school No formal education 5 5 18 39 12 13 7 10 20 30 40 50 More than 50% of the Namibian adult population are under 35 More than 50% of the Namibian adults have not completed secondary school Note: Adult population refers to people aged 16 years and older (bankable age in Namibia) Demographic characteristics (cont.) Access to water Sanitation Piped water into Public tap/standpipe Unprotected dug well Tube well/borehole Surface water Rainwater Other Protected dug well Piped water into neighbour's 7 5 4 2 1 1 1 25 52 No facility/bush/field Flush/Pour flush to piped Ventilated improved pit latrine Pit latrine without slab/open pit Flush/Pour flush to septic tank Pit latrine with slab Flush/Pour flush to pit latrine Other 2 2 1 1 1 1 48 43 10 20 30 40 50 60 10 20 30 40 50 60 Approximately 80% of people have access to water within their yard Low levels of access to flush toilet facilities 6
Demographic characteristics (cont.) Energy source (cooking) Electricity Liquid Petroleum Gas/natural 4.2 Kerosene/Paraffin 1.7 Charcoal.2 Wood 41.0 50.7 Compared to other African countries, there are high levels of electricity usage However, there is also still high use of basic energy sources Agricultural crop Animal dung Other.6.4 1.2 Demographic characteristics (cont.) Access to technology (communication) Documentation 100.0 94.5 100.0 91.5 80.0 80.0 60.0 40.0 20.0 42.4 30.1 34.8 60.0 40.0 20.0 33.5 21.1 12.1.0 Cell Phone Public Phone Landline Internet.0 ID Residential Address Proof of Income Drivers License High levels of access to communications technology, particularly cell phone Almost the entire adult population has formal documentation, i.e. an Identity Document (ID) 7
Income Monthly personal income Refused.2 Don't know 2 More than NAD 11,000 3 NAD 9,001.00 to NAD 11,000.00 1 NAD 7,001.00 to NAD 9,000.00 1 NAD 5,001.00 to NAD 7,000.00 3 NAD 3,001.00 to NAD 5,000.00 5 NAD 1,001.00 to NAD 3,000.00 13 Up to NAD 1,000.00 52 I do not have a regular monthly income 19 10 20 30 40 50 60 Almost half the adults earn N1000 or less, while 19% do not receive a regular income Income (cont.) Ease of keeping up with financial commitments Frequency of income lasting until next income is received 34.0 26.5 36.8 39.6 21.8 23.6 10.8 7.0 Very difficult Somewhat difficult Netither easy nor diffult Somewhat easy Very easy Never Seldom Often 60% have difficulty keeping up with financial commitments while 76% have problems making ends meet 8
Income (cont.) Main source of income Salary/Wages from Government/Parastatal Government old age pension Self-employed (have own business) - informal sector Remittances (money from friends/family) Get money from someone else Salary/Wages from private company 12.0 11.3 9.5 9.0 7.9 18.6 Only 8% receive a salary/wage from the private sector compared to 19% receiving salaries/wages from government 25% receive money from others, while 11% are self employed and 12% rely on government pensions Someone else pays my expenses 6.5 Salary/wages from an individual (ie domestic worker/farm work) 5.8 Income (cont.) Frequency of income Mode of payment Did not specify Upon competion of job Occasionally 1.9% 1.5% 14.1% I do not receive the money In my Mobipay account 1.8%.7% Seasonally Annually Monthly 8.3% 2.9% 59.7% Western Union/Thomas Cook/Paypal Into bank or Nampost account.6% 28.3% Fortnightly (every two weeks) Weekly Daily 1.6% 3.0% 7.0% Cheque Cash in hand 2.3% 66.3% 60% receive a monthly income 66% receive their income in cash and only 28% receive their income into a bank account 9
Understanding the lives of people in 2012 Refused Always Often Sometimes Never Had to go without a cash income 0.2% 3.7% 9.5% 41.0% 45.6% Almost 41% of people had to go without a cash income in the last 6 months and had to make a plan to make ends meet Losing money through crime and the death of an income earner is a significant household concern Household financial concerns Losing the money I earned (eg through stealing) 37.1% Death of main income earner The education of my children Not having enough money in a couple of years / when I Getting wrong financial advice That I cannot buy enough food at the end of the month Unforeseen natural disasters (flooding etc) 21.9% 20.2% 17.2% 15.6% 12.7% 12.4% Key take-outs Young population with a large majority that has not completed high school Although there are high levels of access to water, there are low levels of access to proper sanitation High levels of access to electricity compared to other African countries Low income levels, and personal income is received mainly through cash payments, mainly on a monthly basis In addition to not receiving more income, losing the money through crime was a significant concern Rising living costs has had a significant impact on people A large proportion of the population receive money from others 10
Financial inclusion Analytical framework of the study Total adult population = Minimum age defined by the age at which individuals can enter into a legal financial transaction in their own capacity Financially included = Adults who have/use financial products and/or services formal and/or informal Financially excluded = Adults who do not have/use any financial products and/or services if borrowing, they rely only on friend/family; and if saving, they save at home Formally served = Adults who have/use financial products and/or services provided by a financial institution (bank and/or non-bank) Informally served = Adults who have/use financial products and/or services which are not regulated, e.g. cooperatives, farmer associations, saving clubs/groups, private money lenders Banked = Adults who have/use financial products and/or services provided by a commercial bank regulated by the central bank Formal Inclusion Served by other formal financial institutions = Adults who have/use financial products and/or services provided by regulated non-bank formal financial institutions, insurance companies, retail credit providers, remittance service providers 11
Defining financial inclusion Financial Inclusion Formally served Have/use only bank products Have/use bank AND non-bank formal products Have/use only nonbank formal products Informally served Have/use bank products AND informal products Have/use bank AND non-bank formal products AND informal products Have/use only informal products Have/use non-bank formal products AND informal products Financial inclusion in Namibia Financial inclusion 2007 versus 2012 Formally served 65 47 Banked 62 45 Other formal 46 19 Informally served 13 6 Excluded 31 51 0 20 40 60 80 2012 2007 65% of Namibian adults (727 736) are formally served 62% of adults are banked 46% of adults have/use other formal bank products/services 13% of adults have/use informal mechanisms for managing their finances Financial exclusion has reduced from 51% in 2007 to 31% in 2012. However, if they save they keep their money at home and their only coping mechanism is reliance on families and friends 12
What drives the use of products/services? When looking at the overall use of financial products it is clear that there is still scope to deepen both the quality and the extent of inclusion. What drives banking Transactional Savings Credit Funeral Remittance 2 10 13 92 99 Banking is largely driven by transactional and saving products: 99% of banked adults have/use transaction products 92% have/use savings products Only 13% have/use credit products 10% have/use funeral cover 2% use the bank/banking products for remittance purposes What drives the use of products/services? (cont.) Insurance Savings Credit Remittance 12 18 64 68 What drives the use of other formal products/services 68% of adults who use nonbank formal products have/use insurance products including short- and long-term products 64% have/use savings products 18% have/use credit products 12% use remitting products/services 13
What drives the use of products/services? (cont.) Credit Savings 25 29 What drives the use of informal products 29% borrow from informal lenders 25% of adults who use informal mechanisms belong to savings groups 9% are members of burial societies Burial society 9 Access Strand In constructing the Access Strand, the overlaps in financial product/service usage are removed, resulting in the following segments: Financially excluded individuals Individuals who have/use informal products/services and NO formal products Individuals who have/use formal non-bank products/services and NO commercial bank products Individuals who have/use commercial bank products 2012 62 3 4 31 Banked 2007 45 21 52 Formal other (nonbank products) Informally served only Not served The proportion of banked adults increased from 45% in 2007 to 62% in 2012 The percentage of financially included adults has increased significantly from 48% 2007 to 69% in 2012 The increase in the proportion of the banked population seems to be in transaction and saving accounts, as shown by the drivers of banking 14
Access Strand by gender Male 62 3 5 30 Banked Female 62 3 4 31 Formal other (nonbank products) Informally served only Not served Namibia is the only country where FinScopedepicts a higher uptake of informal mechanisms amongst the male adult population compared to the female adult population Access Strand by urban/rural Urban 76 3 2 19 Banked Rural 51 4 6 39 Formal other (nonbank products) Informally served only Not served There are large differences in the levels of financial inclusion: 81% of the urban adult population is financially included, compared to 61% of the rural adult population High levels of financial inclusion among the urban adult population is driven by the usage of banking products/services (76% have/use banking products) 15
Comparing access across countries RSA '11 63 5 5 27 Namibia '2012 62 3 4 31 Swaziland '11 44 6 13 37 Botswana '09 41 18 8 33 Lesotho '11 38 20 23 19 Ghana '10 34 7 15 44 Nigeria '10 30 6 17 47 zimbabwe '11 26 9 24 41 Kenya '09 29 18 26 33 Uganda '09 21 7 42 30 Malawi '08 19 7 19 55 Rwanda '08 14 7 26 53 Zambia '09 14 9 14 63 Tanzania '09 12 4 28 56 Banked Formal other (non-bank products) Informally served only Not served Landscape of Access 2007 and 2012 The FinScopemethodology uses the Landscape of Access to illustrate the degree to which individuals (aged 16 years and older) have/use financial products and services. The diagram depicts, on its four axes, the percentage of adults that have or use: Transaction products/services Saving products/services Credit products/services Insurance products/services Insurance 36 18 Transaction 80 60 40 20 0 63 45 Savings 64 46 2012 2007 The Landscape of Access in Namibia is largely driven by transaction and saving products Credit and loans 20 15 16
Formal financial sector snapshot Financial institutions Commercial banks 4 Savings bank (Nampost) 1 Insurance companies 10 Microlenders 348 Number of providers Number of access points by registered financial institutions Long term insurer Savings bank/nampost Other Microlender Banks Short term insurance 35 119 175 349 384 561 The financial services sector has remained stable with four commercial banks, one savings bank, ten insurance companies and a large number of microlenders Independent mobile payments services (Mobipay) were introduced since the last survey in 2007 Nampostchanged their product and strategy which has significantly driven product uptake: The physical savings book product was terminated and a biometric smartcard aimed at low income users was introduced Banking 17
Bank presence by region Region Bank Windhoek First National Bank Nedbank Standard Bank Nampost Total Caprivi 2 3 2 2 4 13 Erongo 17 16 10 12 13 68 Hardap 8 6 0 6 8 28 Karas 11 10 4 10 18 53 Kavango 5 3 1 2 4 15 Khomas 36 49 26 18 22 151 Kunene 5 4 0 4 6 19 Ohangwena 4 4 4 2 5 19 Omaheke 3 3 0 4 6 16 Omusati 2 2 2 2 7 15 Oshana 12 11 6 8 7 44 Oshikoto 5 3 0 4 9 21 Otjozondjupa 9 12 2 8 10 41 Other 15 Total number of outlets 119 126 57 82 134 518 42% growth in bank presence since 2007, largely driven by growth in Nampost branch network Commercial bank branch growth at 7% Notes: Standard Bank branch data unavailable Bank branches opened since 2007 COMMERCIAL BANKS BRANCHES OPENED SINCE 2007 BRANCH LOCATIONS SINCE 2007 BANK WINDHOEK 14 FIRST NATIONAL BANK NAMIBIA 15 NEDBANK NAMIBIA 5 STANDARD BANK NAMIBIA NKURENKURU OUTAPI LUDERITZ ARANDIS (AGENCY) OMARURU AIGAMS (AGENCY) KHOMASDAL (AGENCY) OKONGO KATUTURA OUTAPI EENHANA OSHIKANGO HENTIES BAY OMUTHIYA WINDHOEK, OLD POWER STATION BUSINESS CENTRE EENHANA KATIMA MULILO Have not received information yet WALVIS BAY (AGENCY) REHOBOTH OSHIKANGO PROSPERITA (AGENCY) CAPRICORN BRANCH OMITHIYA SWAKOPMUND (AGENCY) WINDHOEK, PROSPERITA WINDHOEK, NORTHERN INDUSTRIAL OKAHAO WINDHOEK, PRIVATE CLIENTS SWAKOPMUND, MONDESA USAKOS OSHAKATI, GAME SHOPPING CENTRE GROOTFONTEIN OUTAPI 18
Unpacking growth in banking services Demographic Characteristics 2007 (n=1200) 2012 (n=1200) Gender % % Male 47 62 Female 46 63 Age % % 16-20 26 32 21-26 23 58 27-31 56 70 32-39 61 96 40-50 56 66 51 + 46 74 Area definition % % Urban 70 77 Rural 36 51 Personal monthly income % % No income 8 29 Less 1000 41 57 1001-3000 88 94 3001-5000 87 95 5001-13000 96 99 13001 + 98 100 17% increase in the banked population from 2007-2012. The increase has largely come from: People aged 32-39 Mostly living in rural areas Very low income Low growth in high income segments as inclusion was already high in these segments Physical access to a bank or post office 80 70 60 50 72 Physical access to bank 49 60 50 40 51 Physical access to Post Office 42 43 40 30 20 10 14 23 35 5 Urban Rural 30 20 10 17 26 7 Urban Rural 0 Less 30 minutes Between 30-60 minutes More than an hour 0 Less 30 minutes Between 30-60 minutes More than an hour Namibia is characterised by low population density spread across the country Traditional brick-and-mortar solutions are not cost-effective as they are currently not reaching the poor Alternative distribution channels such as mobile, branchless and agency banking are key to driving financial inclusion 19
Banking product penetration Banking product usage Savings Account/Smartcard or Savings Book at a bank or Nampost ATM card Debit card Current/cheque account Cellphone banking Fixed Deposit Account at a bank Internet banking Credit card Bank overdraft Loan account from a bank or Nampost Money market account 7 6 4 4 2 2 1 13 22 41 43 14% of adults (157 617) dropped out of banking, i.e. previously had a bank account but do not have one any more 0 5 10 15 20 25 30 35 40 45 50 Banking (cont.) Main advantages of using a bank account Mainly refer to safetyand ease of use Money is safe from theft 52.3% Salaries can be deposited 37.7% Easy way of receiving money from others Safe wat of receiving money from others 22.9% 30.1% Easy way of sending money to others 14.6% Safe way of sending money to others 12.1% You get interest on savings 12.1% 20
Banking (cont.) Barriers to banking Reasons for not having a bank account or using banking products and services mainly relate to a lack of financial resources and affordability: I have no money to save (54.4%) I cannot maintain the minimum balance (25.7%) Bank services charges are too high (14.6%) Insufficient or no money coming into the account (12.4%) Other reasons refer to proximity/ geographical accessibility (banks are too far away 15.1%) and lack of documentation (I do not have the documentation required 9.4%) Savings 21
Savings Understanding the levels of financial inclusion is only the first step. While insightful in itself, this understanding is enhanced by exploring products and services that the poor are likely to have/use under each category of inclusion. The Savings Strand focuses on the usage of savings and investment products, resulting in the following segments: Individuals who have not/ do not use savings products/services Individuals who keep all their savings at home (i.e. these individuals do not have or use formal or informal savings products or mechanism) Individuals who have a formal savings/investment product, Individuals who rely on informal mechanisms Savings 62.9% 0.6% 9.6% 27.0% formal informal at home or in kind do not save Savings (cont.) Main factors for choosing a savings product It should be recommended by family/friends/others in the community It should offer low fees and charges I must know that my money is safe I should trust the product It should be offered and explained in a language that I understand It should be recommended by the newspaper, radio and by offial institutions The contract should be well explained to me It should be a product that is associated with a well known brand 12.8% 11.1% 22.2% 20.0% 19.5% 23.5% 28.9% 34.6% Trust and low bank charges are reasons for choosing a savings product Savings products have been largely driven by Nampost Smartcard 48% have a Nampost savings account or Smartcard, followed by 24% with a FNB account, and 10% with a Standard Bank or Nedbank account 22
Savings (cont.) Frequency of saving 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 27.5% 1.9% 3.0% I do not save at all I save on a daily basis I save on a weekly basis I save on a monthly basis I save if and when I have extra money 30.5% 37.1% Barriers to savings Insufficient income and not having any money left at the end of the month are key barriers to saving Borrowing 23
Borrowing The informally served (i.e. adults who have/use financial products and/or services which are not regulated, e.g. cooperatives, farmer associations, saving clubs/groups, private money lenders) are the main users of credit products. This understanding is enhanced by exploring products and services that the poor are likely to have/use under each category of inclusion. The Credit Strand focuses on borrowing and the usage of credit products, resulting in the following segments: Individuals who have/use formal credit products/services Individuals who rely on informal mechanisms Individuals who borrow from family and friends Individuals who keep all their savings at home (i.e. these individuals do not have or use formal or informal savings products or mechanism) 12.5% 7.4% 12.3% 67.8% Credit formal informal family and friends no credit Borrowing (cont.) Deciding factors for borrowing/loan product It should offer low fees and charges It should be recommended by family/friends/others in the community I should trust the product It should be offered and explained in a language that I understand It should be recommended by the newspaper, radio and by official institutions I must know that my money is safe The contract should be well explained to me It should be a product that is associated with a well known I should be able to get my money fast It should be easy to understand how the product works 9.5% 13.2% 12.5% 11.8% 17.1% 15.9% 21.3% 19.9% 33.9% 31.6% 15% of respondents borrowed money during the past 6 months 15.1% received goods/services in advance and had to pay for it later The main reasons for not borrowing money/taking goods or services on credit were: Fear of debt (48.8%) Fears about not being able to pay back the debt (28.1%) No need for it (26.4%) No specific reason (10%) Low bank charges and recommendations from known sources are top deciding factors in choosing loan products However, other reasons such as knowing that the money is safe, ease of ability to get the money and easy to understand are also important 24
Insurance Insurance The Insurance Strand focuses on insurance products and services, resulting in the following segments: Individuals who have/use formal insurance products/services Individuals who rely on informal mechanisms Individuals who have/use no insurance products/services Insurance 36.2%.2% 63.6% formal informal no insurance 64% of the adult population have no/do not use any insurance products/services 25
Main risks Main risks that impacted on income levels in the past six months Illness within your household or family that required medical expenses Rise in living costs such as rent, electricity, fuel, food transport costs Having to pay unforeseen school/education fees Increase in household size Loss of income from income earner Other natural disasters (flood etc) which effected my source of income Death or illness of livestock 5 4 3 10 10 13 14 Main risks include the following: Unplanned events (such as illness within household or family that requires medical attention) Rise in living costs Paying for unseen school/ education fees Increase in household size Harvest failure or losses of crop harvest 3 0 5 10 15 Financial capability 26
Financial planning Planning spending of income in order for it to last until next income? 56.1 43.9 Don't plan Plan Financial literacy Financial Product Awareness Bank accounts Pension Fund products Medical Aid products Smart Card Life insurance Mobipay Credit Card Short term insurance No spontaneous mention of financial products 8.1% 5.4% 4.0% 3.7% 3.3% 13.1% 17.3% 16.1% 26.1% Bank accounts have the highest financial product awareness at 26% Pension fund, medical aid and smart card products have high awareness Unit Trusts 1.0% Investment products (eg Bonds).9% Friendly societies.8% Other loan products.1%.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 27
Sources of financial information Sources where financial information is obtained for making important financial decisions Relatives 43.7% Spouse/Parner 22.3% My own information 14.3% A financial advisor 7.8% The bank 4.4% Other 7.6% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% The majority rely on their relatives or spouse/partner as a major source of information for making important financial decisions 11% rely on formal sources like a financial advisor or a bank for obtaining information on making important financial decisions Conclusion 28
Key take-outs Comparing 2007 and 2012 figures show a large increase in the percentage of adults that are formally served - 65% of Namibian adults (727 736) are formally served This increase has been driven by: High uptake in transactional and savings products between 2007 and 2012 Financial sector innovation through products and services, technology and expansion of the distribution footprint Increase in local economic activity in selected areas e.g. Ausenkehrn, Rosh Pinah, Erongo which has in turn driven uptake in banking products Growth in banking infrastructure in general with increased branches, agencies and ATMs Insurance and savings products are the primary drivers of the non-bank formal products Financially excluded individuals are mainly engaged in credit and savings activities 31% of adults are financially excluded Affordability and a lack of financial resources are the key barriers that inhibit uptake of formal financial services for those that remain financially excluded Conclusion Key take-outs Low levels of personal monthly income Income received is mainly cash monthly Losing the money through theft was a significant concern Rising living costs have impacted ability to make ends meet A large proportion of adults receive money from others Increased uptake of formal financial products and services Opportunities Appropriately priced, easy to use products/services Safe, secure banking services Compelling value proposition for receiving salaries into a bank account Ability to send and receive money to third parties Banking services within easy reach of the population 29
Conclusion Uptake of financial services has been driven by... Innovative new products/services -low cost, no minimum balance and allowing for long periods of inactivity on the account Technology innovation which allows for minimal administrative burden on customer, guaranteeing security Expansion in overall distribution footprint of formal financial services, especially through extensive Post Office branches Business model innovation Increase in economic activity, e.g. the mining sector Thank you www.finmark.org.za 30