Poor Saving Culture or Poor Incentives to Save in Zambia?

by Chama Bowa-Mundia and Caesar Cheelo

On Tuesday (31st October 2017), the Bankers Association of Zambia (BAZ) and the Bank of Zambia (BOZ) 2017 commemorated World Savings Day by hosting a savings culture promotional event in Lusaka.

During this event and on several other platforms, BOZ and commercial banks have bemoaned the poor saving culture in Zambia. They assert that the poor culture is evidenced by low savings in financial instruments, particularly in commercial bank savings accounts. The BAZ/BOZ event was therefore meant to encourage Zambians to embrace a culture of saving and overcome the current “poor saving culture”.

But is Zambia’s savings culture really as poor and lamentable as BAZ and BOZ have made it out to be? And if yes, what is at the core of the poor culture; is it the knowledge and attitudes among would-be retail savers or the environment for saving in Zambia that is amiss? Let’s explore these issues.

Firstly, some amount of confusion exists about the levels and proportions of savings in Zambia. Stanbic Bank estimates the savings-to-GDP ratio is below 20 percent while BAZ estimates it at 5 percent. Surprisingly, however, none of these figures are officially published anywhere, which raises questions about their reliability. We therefore did our own calculations using BOZ data on savings deposits and total commercial bank liabilities (deposits) and Central Statistical Office data on nominal GDP. We found that savings deposits were around 2.8 percent of GDP in 2016. Thus, based on a very narrow definition of savings, one would argue that Zambians are poor at saving.

But let us contrast this with an alternative estimate based on a broader definition that focuses on all savings in the domestic economy. The World Bank World Development Indicators estimate that Zambia's gross domestic savings as a percentage of GDP was 33 percent in 2015, which was higher than that of all its eight neighbours and even higher than South Africa's, at 20 percent of GDP. By this measurement, Zambia is by no means a poor saver.

At a more microeconomic level, the 2017 World Bank financial capabilities survey reveals that 60 percent of adults do not have formal bank accounts. But this should be qualified considering the 2015 FinScope survey revelation that the 60 percent unbanked population utilizes other saving mechanisms such as cash-at-home, ‘chilimbas’ (informal workplace, family or friends savings groups), community organised Savings Groups, etc.

Clearly, definitions matter a great deal in taking a position on whether or not a given society has a poor or rich savings culture.
Nuancing this issue of definitions a bit more, Zambian households that banks tend to target at the retail-end of the financial markets spectrum seem to prefer to invest in alternative forms of small assets than keep money in savings accounts. The 2015 Living Conditions and Monitoring Survey reports that 61 percent of households owned cellular phones as one form of household asset.

But why would it be that people opt out of savings accounts and instead go for alternative savings or assets? Well, we would argue that this significantly depends on underlying incentives and disincentives. And exactly how do incentives and disincentives work? A few illustrations might help.

The BOZ annual report for 2016 reports that the real average savings rate on savings accounts amounting to more than K100.00 was -5.3 percent in 2016. This means anyone keeping money in an ordinary savings account lost about 5.3 percent of their money’s worth due to inflation. What should have been an incentive in terms of a positive interest or return on the savings turned into a disincentive or negative real interest rate.

Going a bit further, out of the 19 commercial banks registered in Zambia as of 30th June 2017, only three – AB Bank (no minimum balance), Access Bank (K30 minimum balance), and Barclays (no minimum balance) – offered savings accounts without any monthly maintenance fees. For the rest, the fees ranged from K5.00 per month in Indo-Zambia Bank and UBA to K50.00 in Standard Chartered. So anyone saving money in a Zambian commercial bank for any length of time would face a second disincentive in terms of monthly deductions of maintenance fees.
Something that is important for commercial bankers to carefully consider is that people are not naïve about the returns on their money. When faced with disincentives, they will opt to keep moneys in forms other than savings accounts.

Given these examples, the low uptake of formal financial products, notably the savings account, which BAZ has lamented about, is likely to remain low in Zambia for as long as the incentives do not favour low-end retail depositors; the bulk of the population will most likely continue saving in alternative forms. Ultimately banks will do well to avoid oversimplifying the issue of savings by thinking that it can be fixed through campaigns promoting a saving culture. They must assess and listen to their would-be clients and offer products and services that provide worthwhile incentives.

 The authors are researchers at the Zambia Institute for Policy Analysis and Research (ZIPAR). For details contact: The Executive Director, ZIPAR, corner of John Mbita and Nationalist roads, CSO Annex building, P.O. Box 50782, Lusaka. Telephone: +260 211 252559. Email: This email address is being protected from spambots. You need JavaScript enabled to view it..

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