June 2010

On the 15^th April 2010 the Bureau of Market Research (BMR) in collaboration with FinMark Trust, an independent African Trust which aims to promote and support the objective of increasing access to financial services for the un- and under-banked in Africa, released the latest Consumer Financial Vulnerability Index (CFVI) for the first quarter of 2010.

Financial vulnerability depends on various factors both outside a person's control, such as

adverse economic conditions, and those that are specific, including levels of savings or debt.

The overall index and sub-indices are based on a ten-point scale where 0 indicates total

financial security and 10 indicates total financial vulnerability. Please see scale below.

According to the new CFVI for 2010, continuing job losses are leaving more people financially vulnerable in the R30 000 – R100 000 a year income bracket. Although the rate declined towards the end of 2009 and in the first quarter of 2010, the number of people losing jobs is putting more consumers at risk.

Consumers are also at risk due to the price increases of some goods and services, such as food, housing and utilities, medical services, transport and education. Other indications of continued financial stress are the increasing number of consumers making arrangements to pay off their debt over a longer period or cancelling policies to cover household expenditures.

The CFVI score has decreased from 5.48 in the third quarter of 2009 to 4.66 in the first quarter of 2010.

Consumers are however, still lowering their lifestyle and living standards due to the following underlying causes:

1. High levels of unemployment and poverty
2. Low skills levels
3. Low labour market absorption rates
4. High levels of indebtedness and defaults on repayments
5. Ineffective functioning of wealth transfer and service delivery institutions
6. The socio-economic impact of HIV and AIDS

The results of the survey for the four quarters up to the first quarter of 2010 are as follows:

A Savings Vulnerability Decrease is the result of consumers lowering their lifestyle and living standards and becoming better able to cope with their savings. Consumers are also entering into fewer credit agreements, enabling them to save more.

An Expenditure Vulnerability Increase is the result of various factors whereby consumers are dealing with rising costs such as food and transport and living within their means.

A Debt Servicing and Income Vulnerability Decrease is the result of job and income security, lower interest rates and credit rates among consumers.

Even though consumer financial vulnerability improved slightly from the third quarter of 2009 to the first quarter of 2010 as the economy picked up momentum and the rate of job losses decreased, consumers have continued to adapt their lifestyles downwards to cope better with the unexpected crisis that may occur in the future. This cautious approach is a welcome sign and points in the right direction for consumers to be more secure in their individual situations.

About FinMark

FinMark Trust is an independent trust that supports and promotes institutional and organisational development with the objective of increasing access to financial services to the unserved and underserved people of Southern Africa. The Bureau of Market Research (BMR) as a collaborative effort between UNISA and industry that focuses on research to clients and BMR members.

If you would like to gain more insight about the Consumer Financial Vulnerability study you can visit www.finmark.org.za for the research documents and publications. You can also contact us on +27 21 888 6000, email This e-mail address is being protected from spambots. You need JavaScript enabled to view it or visit www.compuscanacademy.co.za.