Pages

Monday, July 18, 2022

Financial worry and how to prepare for any shocks

Empty wallet

These responses may partly reflect the quality and accessibility of local healthcare services in some countries.

Concerns about medical expenses were also generally highest in sub-Saharan Africa (SSA) where the pandemic tested the limited healthcare services.

Better health systems design and performance and more affordable healthcare would help alleviate some of these worries.

Expanding financial inclusion — the access to and use of formal financial services by households and businesses — can also help reduce financial anxiety.

Policymakers see it as a way to help families better protect themselves against shocks.

In many developing economies, sudden illness or an accident that forces a breadwinner to stay home can compound the impact of an external crisis. Availability of formal financial services like targeted insurance can help vulnerable families tide over the immediate crisis.

Seventy-three percent of adults in Kenya reported being worried about the continued financial toll of the pandemic. Women, more than men, reported being very worried about financial hardship caused by the pandemic, with 73 percent of women surveyed in Kenya reporting this. The data confirms the regressive impact of the pandemic on the most vulnerable sections of populations.

Data from the survey also uncovered salient regional themes. In Kenya, for example, 39 percent of adults are apprehensive about school expenses, which represent the biggest worry for 33 percent of adults in sub-Saharan Africa.

By contrast, only 18 percent of adults in South Asia rank school fees as a top worry. The high proportion of adults with school-going children in Kenya, and Sub-Saharan Africa` may partly explain this worry. It also reflects the high out-of-pocket costs associated with schooling in the region.

There are also regional differences when people assess their future outlook. In East Asia, people are least worried about meeting expenses in their old age, whereas over half of the adults surveyed in Sub Saharan countries like Kenya reported being very worried about it.

The lack of concern about old-age expenses doesn’t necessarily reflect a sense of security about the future. Instead, it could reflect the urgency of more immediate financial demands than planning for retirement.

Financial inclusion has expanded in recent years – the Findex report finds 3.3 billion people in developing countries had an account in 2021.

It found that in Kenya, 79 percent of those surveyed did have an account. Additionally, 68 percent of Kenyans surveyed reported ownership of a mobile money account, which was the highest concentration seen in all the countries surveyed.

The chasm in financial worry between developed and developing economies remains, however, with half of the adults in developing economies reported being very worried about one or more common financial expenses whereas, in high-income economies, only about 20 percent said the same.

Closing the gap

Financial worrying impacts overall well-being and is linked with lower productivity and suboptimal decision-making. It also points to gaps in the existing global effort toward building financial resilience.

As a result, hundreds of millions in developing countries remain perilously unprepared to face economic shocks from emerging global challenges such as climate change.

The findings from the Findex 2021 report underline the urgency of protecting them.

No comments:

Post a Comment