Express (July 22, 2011)
Forty seven per cent investors in gilt-edged (or government) savings instruments are highly dependent on incomes, coming as rates of return on such savings tools to bear their livelihood cost, reveals a study report of Bangladesh Bank (BB).
Lower and middle income groups in the society are the major buyers of savings instruments, considering the investment a risk-free venture, the report, first of its kind, said.
The BB in its report strongly suggested to the government to introduce separate savings schemes for the retired service holders in the private sector, the elderly people and the widows to shield themselves from the rising cost of living. It recommended for higher rates of interest on the proposed schemes than those of the existing ones. The returns coming from the new tools as incomes should be tax-exempted, the report added.
The study report, styled "sample survey on socio-economic characteristics of investors of savings instruments," has recently been submitted to the Ministry of Finance (MoF).
The survey was conducted on 1336 individuals in seven administrative divisions of the country.
The survey found 52.5 per cent of savings instruments buyers are males and the rest 47.5 per cent are females.
According to the report, buyers of three monthly Sanchaypatras (saving certificates) were the highest in number in 2010 as 86,468 individuals bought the instruments out of a total of 1,61,456 investors in all government savings certificates in the same year.
Investors in Dhaka district were the highest in number or 15.3 per cent of total investors in 2010, followed by 15 per cent in Chittagong district, 14.10 per cent in Sylhet, 13.40 per cent in Bogra, 12 per cent in Khulna, 11.2 per cent in Barisal, 10.5 per cent in Rajshahi and 8.5 per cent in Rangpur.
The highest portion of Sanchaypatra buyers, which is 42.09 per cent, are aged between 40 and 56 years, 35 per cent buyers are above 57 years old and 22.1 per cent are below 40 years, the report stated.
Of the buyers, 76 per cent are Muslims, 21.90 per cent, Hindus, 1.6 per cent, Buddhists and 0.6 per cent, Christians, the BB report said.
Of the total investors, 34.1 per cent are housewives, 25.1 per cent, retired persons and 21.5 per cent, service holders (public servants seven per cent, private service 5.7 per cent, bankers 2.1 per cent and teachers 5.7 per cent).
The majority of the investors -- 83.5 per cent -- in urban areas and the rest 16.5 per cent live in rural areas, according to the findings of the report.
Average family members of an investor is 4.68, while 14.2 per cent of the investors have no bank account.
Elaborating, the study report said 23 per cent income of a family, which is invested in Sanchaypatrays, comes from such savings instruments. Incomes of those elderly people who invested in savings certificates, make up 31 per cent of their total income and 29 per cent income of women comes from the same investment.
The BB report suggested to the government to raise the rates of return on different savings tools so that the government can lessen its huge bank borrowing and address its crowding-out effects on the private sector.
"We strongly feel that government should not frequently change the rates of return and taxes on savings tools so that lower and middle income groups in the society can invest in such certificates to bear their expenses," a top BB official, who was involved in preparing the study report, said.
A high official in the MoF said they have taken the report seriously and a policy on savings instruments will be finalised prudently in the near future.
He, however, said some minor changes have already been brought about in the current fiscal budget through increasing the rates of returns on saving certificates and slashing the tax at source on incomes from them.
About introducing separate schemes for a number of vulnerable groups, as recommended by the BB report, he said, "This recommendation might be taken into account in the budget for the next fiscal."
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