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Hard times but savings steady
published: Sunday | June 15, 2008
Avia Collinder, Gleaner Writer
In the face of rising prices Jamaicans are maintaining some measure of thrift - keeping healthy saving accounts and putting money into investment houses, data from the Bank of Jamaica (BOJ) show.
Local banks have seen a noticeable jump in deposits over the last few months, credited in part to the demise of some alternative investment schemes, but also to the sheer resilience of the Jamaican consumers and their ability to limit spending in the face of spiralling prices.
savings rose
In the first three months of the year, for example, individual savings rose by $8 billion to $119 billion at March 2008.
Personal deposits slipped back to $115 a month later, at the end of April, but even then, it was still $14 billion, or 14 per cent more than the savings in the commercial banking system a year ago, and a 38 per cent premium on the $83 billion recorded in April 2005 - the year that the investment schemes appeared to have seriously taken root.
But the investment houses are also reporting improved business, even in the face of rivalry from the foreign exchange trading clubs.
Wayne Wray, president of First Global Bank, notes that many Jamaicans are saving in more diversified instruments, like regional stocks and international mutual funds, as opposed to regular savings account.
"Those who save harder may be doing so in preparation for even harsher conditions in the case of job loss and increasing prices," Wray told Sunday Business.
anticipation of recovery
"Higher net worth individuals may also save more in anticipation of recovery and the consequent opportunities which generally follow a slump."
Across the decade, individual savings have more than doubled from $51 billion, but it is continuing growth of deposits in 2007 and into 2008 that would be most interesting, given the bashing that the banks' image took then.
Amid legal battles with some of the investment schemes, the bank's comparative low returns (5 per cent per annum), relative to the investment schemes (10 per cent per month), was exposed and with it came an attendant disaffection by savers.
growing in business
But the figures indicate that up to the first quarter of this year, the banks have not been hurt, and indeed have managed to grow business.
At the National Commercial Bank (NCB), Sharon Williams, manager of consumer banking and customer relations, notes that while the bank was going after even bigger deposits this year, the savings pattern for the individual customer segment has been underscored by steady increases year over year.
As at March 31, 2008, NCB group deposit portfolio - covering all classes of clients - was at $120 billion, 16 per cent growth since March 2007.
On the investment side, First Global Financial Services says its business has not faltered.
FGFS president, Sandra Shirley, posits a connection between an upswing in investments at her firm and similar institutions and the demise of some unregistered investment schemes.
upswing this year
"We have seen an upswing since the start of the year. People who used to save with some of the unregistered entities have become more cautious," she said.
"The regulators have been making people conscious of the fact that they are taking high risks. As times get harder, people are more conscious of how they mange their money. Savers who normally would have had bank deposits appeared to have returned to the banks in the first quarter."
According to Shirley, when disposable income falls, people tend to become more risk-averse.
spending carefully
Their spending decisions are more carefully thought out, they are more inclined to conserve and they cut back on discretionary spending.
"You grow vegetables if you can, eat out less; you take lunch to work," said Shirley.
"A large proportion of Jamaicans do that. They continue to save as they were saving before and keep their pension investments, their 'partners' and insurance going."
An additional fillip to the investment market is the behaviour of young Jamaican investors, who are adopting the culture of thrift.
"It is interesting," said Shirley, "young people are becoming more investment-savvy." Not only are young people investing more, they are also monitoring their spending more carefully.
One young consumer says she has cut certain "luxuries" out of her diet.
increase in everything
"I used to buy a particular juice for $300, I no longer do, I no longer buy expensive commodities. I have also stopped going out with friends on a Friday, I can't afford it," she told Sunday Business.
"Everything is increasing. National Housing Trust just wrote me to say that my mortgage is more. I have to adjust somehow. I am not saving right now but I am investing in my home, which I know will be good for part of my retirement needs. I have an aunt who keeps telling me to buy bonds, but I can't right now," she said.
Other Jamaicans have dumped the retail supermarkets in favour of the wholesale grocers, while others have cut back significantly on their food bills.
Vanessa Lewis, a 32 year-old junior manager in Kingston, has moved her supermarket budget from $25,000 to $16,000.
"Wherever it stop, it just stop," she said.
Lewis also told Sunday Business that even with the tightening of the strings, she has been able to maintain an active savings account.
published: Sunday | June 15, 2008
Avia Collinder, Gleaner Writer
In the face of rising prices Jamaicans are maintaining some measure of thrift - keeping healthy saving accounts and putting money into investment houses, data from the Bank of Jamaica (BOJ) show.
Local banks have seen a noticeable jump in deposits over the last few months, credited in part to the demise of some alternative investment schemes, but also to the sheer resilience of the Jamaican consumers and their ability to limit spending in the face of spiralling prices.
savings rose
In the first three months of the year, for example, individual savings rose by $8 billion to $119 billion at March 2008.
Personal deposits slipped back to $115 a month later, at the end of April, but even then, it was still $14 billion, or 14 per cent more than the savings in the commercial banking system a year ago, and a 38 per cent premium on the $83 billion recorded in April 2005 - the year that the investment schemes appeared to have seriously taken root.
But the investment houses are also reporting improved business, even in the face of rivalry from the foreign exchange trading clubs.
Wayne Wray, president of First Global Bank, notes that many Jamaicans are saving in more diversified instruments, like regional stocks and international mutual funds, as opposed to regular savings account.
"Those who save harder may be doing so in preparation for even harsher conditions in the case of job loss and increasing prices," Wray told Sunday Business.
anticipation of recovery
"Higher net worth individuals may also save more in anticipation of recovery and the consequent opportunities which generally follow a slump."
Across the decade, individual savings have more than doubled from $51 billion, but it is continuing growth of deposits in 2007 and into 2008 that would be most interesting, given the bashing that the banks' image took then.
Amid legal battles with some of the investment schemes, the bank's comparative low returns (5 per cent per annum), relative to the investment schemes (10 per cent per month), was exposed and with it came an attendant disaffection by savers.
growing in business
But the figures indicate that up to the first quarter of this year, the banks have not been hurt, and indeed have managed to grow business.
At the National Commercial Bank (NCB), Sharon Williams, manager of consumer banking and customer relations, notes that while the bank was going after even bigger deposits this year, the savings pattern for the individual customer segment has been underscored by steady increases year over year.
As at March 31, 2008, NCB group deposit portfolio - covering all classes of clients - was at $120 billion, 16 per cent growth since March 2007.
On the investment side, First Global Financial Services says its business has not faltered.
FGFS president, Sandra Shirley, posits a connection between an upswing in investments at her firm and similar institutions and the demise of some unregistered investment schemes.
upswing this year
"We have seen an upswing since the start of the year. People who used to save with some of the unregistered entities have become more cautious," she said.
"The regulators have been making people conscious of the fact that they are taking high risks. As times get harder, people are more conscious of how they mange their money. Savers who normally would have had bank deposits appeared to have returned to the banks in the first quarter."
According to Shirley, when disposable income falls, people tend to become more risk-averse.
spending carefully
Their spending decisions are more carefully thought out, they are more inclined to conserve and they cut back on discretionary spending.
"You grow vegetables if you can, eat out less; you take lunch to work," said Shirley.
"A large proportion of Jamaicans do that. They continue to save as they were saving before and keep their pension investments, their 'partners' and insurance going."
An additional fillip to the investment market is the behaviour of young Jamaican investors, who are adopting the culture of thrift.
"It is interesting," said Shirley, "young people are becoming more investment-savvy." Not only are young people investing more, they are also monitoring their spending more carefully.
One young consumer says she has cut certain "luxuries" out of her diet.
increase in everything
"I used to buy a particular juice for $300, I no longer do, I no longer buy expensive commodities. I have also stopped going out with friends on a Friday, I can't afford it," she told Sunday Business.
"Everything is increasing. National Housing Trust just wrote me to say that my mortgage is more. I have to adjust somehow. I am not saving right now but I am investing in my home, which I know will be good for part of my retirement needs. I have an aunt who keeps telling me to buy bonds, but I can't right now," she said.
Other Jamaicans have dumped the retail supermarkets in favour of the wholesale grocers, while others have cut back significantly on their food bills.
Vanessa Lewis, a 32 year-old junior manager in Kingston, has moved her supermarket budget from $25,000 to $16,000.
"Wherever it stop, it just stop," she said.
Lewis also told Sunday Business that even with the tightening of the strings, she has been able to maintain an active savings account.