The Gulf states are facing a “national crisis” over the lack of savings culture among citizens, the CEO of Dubai’s National Bonds Corp said, as he unveiled new research showing 84 of nationals fear they have not set aside enough money to secure their future.
The research from the Islamic savings scheme revealed that 64 percent of 1,107 respondents across the GCC admit less than a fifth of their monthly salary is put aside into a nest egg.
The findings paint a worrying picture of thousands of households unprotected by any financial cushion and illustrate a lack of financial education among Gulf citizens, said Mohammed Qasim Al Ali.
“The consistency in the lack of awareness about the importance of savings and the lack of their being a financial plan is epidemic across the GCC countries,” he said. “That’s where the gigantic task is ahead of it.”
Tough economic conditions, including the soaring cost of food, could threaten citizens with an already unstable financial situation, he added.
“Our mission is to alert the decision makers that this is a national crisis that could have dire results somewhere down the road.”Some 68 percent of respondents told the National Bonds GCC Saving Index that their savings were lower than planned, but cited eating out and annual holidays among their key expenses.
In Qatar, which was last week named the world’s richest nation in terms of per capita wealth, 28 percent of nationals said they had saved “significantly less” than the previous year.
The findings reveal a disconnect between people’s goals and their financial actions, said Al Ali.“People have a short-term view about their financial health because they are locked into a certain living standard,” he said. “A small kid in Europe knows far better how to handle money or the importance of money than somebody in the Middle East and we need to build on their experiences through the last 40 or 50 years and import this culture into our environment.
“[Authorities must] address the root causes of this critical GCC-wide dilemma through education… from the kindergarten to the college.”
Many Gulf governments have opted to bolster their social spending plans in the wake of the Arab Spring unrest. Saudi Arabia, the wealthiest Gulf state, has pledged to spend $43bn on its poorer citizens and religious institutions, while the UAE said it would invest $1.6bn in overhauling roads and ensuring citizens in its poorer northern emirates received uninterrupted electricity.Kuwait last year voted in favour of a bill that required its government to take responsibility of $23.3bn worth of consumer loans belonging to its citizens. Under the terms of the bill, banks wiped the accumulated interest on the loans and rescheduled the payments over a 10-year period.
It’s not the first time Kuwait has bailed out its indebted citizens. On at least two previous occasions, after the Souk al-Manakh stock market crash in 1982 and following the Iraqi occupation in 1991, the Gulf state has assumed the debts of its nationals.
“When people need to be bailed out, for example in Kuwait, there was a big argument whether we should bail these people who had invested in the stock market or we shouldn’t, but you shouldn’t reach that stage as it is the aftermath,” said Al Ali. “Make them financial independent so they don’t end up in trouble.”