Consumers' financial woes ease slightly

Consumers’ financial problems are easing slightly, according to the latest results of the Consumer Financial Vulnerability Index (CFVI) released on Wednesday.

“This is the third quarterly improvement following the third quarter 2009 CFVI peak of 5,44. It is evident that South Africans remain vulnerable although slightly less so in recent months,” said a statement from the Bureau of Market Research (BMR) and FinMark Trust, who developed the index.

The index is measured on a 10 point scale with a score of 0 representing financially very secure, while 10 means totally financially vulnerable.

The overall CFVI improved from 4,72 in the first quarter of 2010 to 4,54 during the second quarter.

Despite the slight improvement, no large-scale decline in vulnerability was expected for the second half of 2010 as the main reasons for vulnerability remain unaddressed.

“These include high levels of poverty, high levels of unemployment, ineffective functioning of wealth transfer and service delivery institutions, high levels of indebtedness and defaults on repayments, low skills levels and the socio-economic impact of HIV and Aids,” BMR and FinMark Trust said in a summary of the findings.

Bad news
The research found a large number of consumers could not keep up payments on their financial obligations, were obliged to make arrangements to pay off their debts over a longer period of time, and were not creditworthy as a result of over indebtedness or due to impaired credit bureau records.

These findings were backed by the second quarter 2010 Credit Bureau Monitor showing the number of credit-active consumers with impaired records increased by 2,6% from 8,37 million during the first quarter of 2010 to 8,59 million during the second quarter of 2010.

The most financially vulnerable were the lowest income group, although high levels of financial vulnerability were found among the middle income group with an income of R30,000 to R100,000 a year.

The most vulnerable age groups were the 18-39 year category.

“This is due to the very low labour market absorption rates for new entrants, as well as high indebtedness among this age group.”

The survey was conducted during the 2010 Soccer World Cup so the researchers cautioned that the feel good factor of this period may have positively influenced the responses of those surveyed.—Sapa