GCC residents show evolving saving sentiments

Residents of Qatar have shown the biggest decrease in savings sentiments, while residents of Bahrain have shown the biggest overall increase, closely followed by the UAE, Oman and Saudi Arabia, according to the results of the 2012 National Bonds GCC Savings Index, released yesterday by National Bonds Corporation PJSC, the UAE-based Shariah-compliant savings scheme and investment company.
The results of the index, which converts respondents' attitudes into a base value that can be used to compare countries against themselves or against one another from year to year, showed that over the past year, residents of Bahrain demonstrated the biggest increase in their savings sentiments, followed by the UAE, Oman and Saudi Arabia. Kuwait remained the same as last year, showing no significant improvement or decline, while Qatar regressed for the second year running, slipping even further down the table and highlighting an increasing level of pessimism towards savings in the country.
The trend of intermittent or lack of savings has continued in 2012, with 74 percent of people in the Kingdom and 71 percent of people in Kuwait, Qatar, Oman and Bahrain admitting that they do not save regularly. The only country that improved significantly is the UAE, where 65 percent of respondents made the same claim. Worryingly, 92 percent of Saudi residents believe that their savings are not adequate for their future - the highest percentage in the region. Other GCC countries displayed similar pessimism with residents of Kuwait (91 percent), Bahrain (88 percent), the UAE (87 percent), Oman (85 percent) and Qatar (84 percent) all close behind.
The findings of the National Bonds GCC Savings Index, now in its third year, also revealed that just 1 percent of residents of Saudi Arabia, the UAE, Qatar, Bahrain and Kuwait, and 2 percent of residents of Oman, would class their savings as 'more than enough' for their future.
Kuwait had the highest percentage of respondents who admitted that their savings are less than they had originally planned at 78 percent, with an average of 71 percent of respondents across the Kingdom, the UAE, Qatar, Bahrain and Oman making the same claim, revealing a need for better education on the mechanisms and tools of savings. Of those who do save, 45 percent of people in the GCC countries revealed that they save only 10 percent of their income or less.
On the positive side, two-thirds of respondents expressed their plan to start saving in the next 6 months. Residents of Oman and Kuwait expressed the most interest in increasing their savings in the next 6 months (76 percent and 70 percent respectively). Half of those surveyed foresee their income to increase in the next 6-12 months, while only 6 percent believe that their income may decrease in next 6-12 months.
The National Bonds Savings Index is an annual comprehensive study of the behavior and attitudes of people in the GCC toward saving and spending money. The initiative was launched in 2010 by National Bonds Corporation PJSC to provide a regional reference point for the development of savings patterns and habits among the general public, and to better understand the reasons for these habits. The survey covered 1,140 residents of Saudi Arabia, Qatar, Bahrain, Kuwait and Oman, and 611 residents of the UAE.
While the research reveals differences in savings habits among residents of the different Gulf countries, reflecting the contrasting economic environments of each, it also shows some common challenges. Groceries and everyday amenities remained the items that residents of the GCC countries claim to be spending more money on year on year.
In Qatar, the percentage of people spending more money on products and services is higher than any other GCC country. Qatar residents also lead the tables in increases in spending on eating out (33 percent) followed by the UAE (30 percent), Kuwait (27 percent) and Oman (26 percent). Saudi Arabia is the highest when it comes to spending more on rents (33 percent), followed by the UAE (31 percent), Qatar and Kuwait (both 30 percent). Bahrain and Oman are a long way behind with just 20 percent and 19 percent respectively.
The results this year have shown an increasing gap in trends related to travel abroad between GCC countries, with Oman having the least percentage of people spending more money on travel outside the country at 15 percent, while the UAE and Kuwait are the highest at 25 percent and 23 percent respectively.
While personal priorities differed among GCC residents, children's education (which ranked number one in the UAE and Qatar) and retirement (which ranked top in Kuwait, Oman and Bahrain) were unanimously chosen as two of the top three reasons for saving money across all six GCC countries. For residents of Saudi Arabia, purchase of property to live in was once again the number one reason for savings, and the factor was similarly prioritized high up among the other GCC countries.
The savings instruments being used the most by residents of the GCC were simple current bank accounts or bank savings accounts. Respondents in the Kingdom use the fewest different types of savings vehicles compared to other GCC countries, perhaps signaling a lack of different tools for savings in the Kingdom. Outside the UAE (24 percent), residents of Qatar are the highest users of gold as a savings tool (17 percent) and are overall the highest users of property as a savings tool (20 percent).
When questioned about the top factors taken into consideration when choosing a savings instrument, Shariah compliance was the number one factor across all markets except the UAE, followed by the reputation of the provider. Attractive annual returns were also a factor that featured in the top five of all markets. The ability of the savings scheme or company to guarantee your invested capital was the third highest priority in KSA but ranked much lower in Kuwait, Oman and Qatar.
The top three priorities are a strong endorsement for National Bonds, which is the only Shariah-compliant retail bond of its type in the region. It has provided cumulative returns of 30.33 percent over the past 6 years, consistently higher than the market average for similar savings deposits.
Mohammed Qasim Al-Ali, chief executive officer of National Bonds Corporation PJSC said: "Our UAE and GCC Savings Indices are eagerly awaited measurement tools, as they not only reflect the current economic environment but act as important indicators regarding the direction in which the economy is heading or is perceived to be heading by its people. This year we noticed that while there is a willingness to save, there is a lack of education as to what tools can be used to save money regularly and effectively. The main reason for this is the culture of people consulting their immediate social circles rather than professional advisers. Our results actually showed that less than a fifth of people in the GCC consult financial advisers when selecting their savings plans and instruments, preferring to make the decision by themselves or consult, in order of importance, their spouse, family, friends, work colleagues first."
National Bonds is currently the leading Shariah-compliant savings scheme of its type in the region, with a customer base that has crossed the 670,000 customer mark from 200 different nationalities. The program has enjoyed huge success since its launch in 2006 due to it loyalty program of prizes and rewards, with over one million prizes distributed worth over 300 million dirhams, including a monthly one-million dirham prize.
Despite not having presence outside the UAE currently, National Bonds facilitates bond purchase for interested regional and international customers through bank wire transfers. Bondholders can also purchase National Bonds certificates through the website, or through requesting a standing instruction order.