High household consumption is a deterrent factor 

Banking: If Bhutanese have a poor saving culture, it is because they spend heavily on improving their living standards or they are not able to explore investment avenues resulting from poor financial literacy, according to a financial literacy survey.

Household consumption in the country is almost half its GDP (59 percent). It was reported that between 2013 and 2014, the total final private household expenditure rose by 17 percent.

Although 60 percent of the population is concentrated in the rural areas, banking services are heavily concentrated in the urban, the survey conducted by a consultant with the Institute of Management studies (IMF), Ugyen stated.

The survey pointed out that most of the family income is spent on consumption for purchase of food items and electrical appliances. Coupled with this, there is a high representation of respondents preferring to buy cars, houses and land with the savings they have.

Among farmers, the survey found that change in the crop patterns for instance, from oranges to vegetables, changing the income stream from bulk to piecemeal.

Families with bulk cash crop income and stream of income such as from sale of potatoes and milk found it convenient to save as they receive their income in bulk while those dependent on piecemeal income found it hard to save from the small income base.

“Change in climatic conditions especially for vegetable growers is posing more difficulty in generating the intended income for the family…” the report states.

Most farmers surveyed claimed that they were denied the ATM card facility since thumb impressions were not accepted to avail the facility. Those who possessed ATM cards feared pressing the wrong button on the ATM machine that might cause them loss from their bank accounts.

Although the gewog banking facilities, have managed to spread the financial services, the perception of savings is misunderstood as surplus. “Saving habits are yet to pick up,” it stated.

“There is no end to consumption,” the governor of the central bank, Dasho Penjore said during the financial literacy programme yesterday. He added that the state of economy is such that it consumes more than what it produce. “So there is a deficit in saving which causes the current account deficit,” he said.

The country is running a current account deficit of 25 percent of GDP.

In the context of the family and the community, the survey revealed that many felt the best way to save is through obligatory schemes. Many claimed that they have also started saving in small amounts on a monthly basis with recurring deposit accounts. But figure reveals that there is a slow growth in the schemes of recurring and fixed deposits, which indicate that long time financial goals and habit of savings is lacking.

The survey also found that it is difficult to save for parents who have their children studying in private schools.

Some farmers have invested in shares with the sole purpose of earning dividends. “But they are not aware of the share trading they can do through securities exchange and land up expressing dissatisfaction when companies don’t declare dividends.”

The survey when extended to students founds that most students are not aware of institutions like Royal Securities Exchange and Credit Information Bureau.

Savings account of students studying outside the country was used only for transferring money. The use of savings account in this case is solely to ease the remittance.

About 56 percent of some 1,500 students surveyed said that they spent beyond their means and 62 percent borrowed money from their friends. It was thus deduced that 78 percent of the representation had limited financial management skills.

“Think twice before spending,” reads one of the many messages displayed at the central bank’s conference hall during the financial literacy programme conducted in celebrating the global money week, yesterday.

Tshering Dorji