Data from Bank Negara Malaysia, the country’s central bank, illustrate a downward trend in household savings from 2018 through the beginning of the COVID-19 pandemic. The latest data available indicate that “two thirds of self-employed respondents have savings equivalent to one month’s expenses, while 83 percent of private employees have two months’ worth of expenses in savings.” Meanwhile, GoGet, a gig-work platform based in Malaysia, and Pod, a microsavings financial technology (fintech) firm targeting low- and moderate-income (LMI) individuals in Malaysia, are attempting to boost household savings.
Based on “focus group discussions, customer surveys with GoGetters and Pod users, and partner interviews,” the authors find that a regular savings habit is an important predictor of ability to handle a financial emergency, defined as an unexpected expense of MYR 1,000 (USD 250). Of the LMI people surveyed who reported saving often, approximately 50 percent were able to effectively manage a financial emergency, whereas approximately 10 percent of those who saved either occasionally or not at all expected to be able to do so. Similarly, 45 percent of Pod users, compared to 13 percent of non-Pod users, indicated they were comfortable handling a financial emergency. The authors argue that a “cycle of savings,” in which LMI individuals gradually build up savings during normal times and can dip into these savings during times of hardship, should be heavily “encouraged to help LMI individuals build financial security and resilience.”
Regarding when savings occur, of 179 surveyed Pod users, 43 percent saved after paying off expenses, while 41 percent saved immediately after receiving their pay. Subsequently, 17 percent of the former group and 36 percent of the latter group met their savings goals. Meanwhile, the authors argue that a “pre-commitment to a goal could trigger the positive financial behaviour of savings in the first place.”
In terms of barriers to saving, the greatest is lack of sufficient funds. Those within the age group 36 to 50 have the most difficulty saving due to spending commitments such as child and elderly care. As for establishing a consistent savings pattern, gig workers and those with low incomes tend to have the most difficulty due to inconsistent levels of income.
This is a summary of a paper published by UNCDF; February 2021; 12 pages; available at https://www.findevgateway.org/sites/default/files/users/user331/11.02.21%20Malaysia%20GoGet%20and%20POD%20Insights.pdf
By Bradley Shulman, Research Associate
Additional Resources
UNCDF homepage
https://www.uncdf.org/
GoGet homepage
https://goget.my/
Pod homepage
https://usepod.com/
Bank Negara Malaysia homepage
https://www.bnm.gov.my/
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