Household Income & Expenditure Survey and people’s financial wellness

Can we describe a budget that is over-indebted and in deficit as financially good? A loan may need to be taken out, but the question is whether he / she has repayment capability or is able to generate funds to repay according to the terms of the loan. Is such information available from household income and expenditure surveys that are regularly conducted by the Bangladesh Bureau of Statistics (BBS)? Household income and expenditure are therefore the two most important financial prerequisites for livelihood. Data on income distribution patterns, income range, income groups, income-expenditure ratio, debt and income differences between different income groups can tell us how well we are at least financially. A family expects a minimum of financial health. So let’s see what we find in the Household Income and Expenditure Survey (HIES) report -2016.

Table 1 shows that the income level of 74.06 percent of total households is lower than the corresponding expenditure level, which indicates a deficit in the family budget of each income group. According to the HIES 2016 results, 98 percent of expenditure is consumption-related and does not include any investments. On average, expenses are 1.46 times income. It turns out that at least 39.49 percent of households cannot afford the minimum cost of spending on the upper poverty line, ie Tk. 9208, as their income level ranges from Tk. <1500 to Tk. 8999 (the average values ​​are also below the upper poverty line). The adequacy of the income is clear. These households are still a long way from being financially healthy (not without a deficit). Apart from this scenario, households with an income of 9,000 to 17449 (34.57 percent) are above the poverty line, but are in deficit. Therefore, they also lack financial health.

Table 2 shows a comparison scenario of deficit and surplus households in the country. The average monthly income per household in the deficit group is 23.40 percent of the average income in the surplus group. On the other hand, the income of the deficit group accounts for 54.07 percent of the national median income. It is therefore evident that three quarters of all households in Bangladesh were in financial need, while five years ago only one third of households had solid financial health. If the detailed statistical table had not been analyzed, the real financial situation of the majority of the population would not have been known.

Financial health simply refers to a financial status when a household’s average annual income is at least 25 percent higher than a household’s average annual spending to meet the aggregate minimum consumption and non-consumption expenditure thresholds determined by BBS using the upper poverty line. The 25 percent higher income is defined as one that allows for an annual inflation adjustment and a minimum of one-time expenses. Table 3 shows that more than three quarters of deficit-plagued households have an enormous deficit of Tk. 30,646 to 114,726. The average deficit of all households at risk of deficit is Tk 47,898. The HIES report, however, says nothing about how the deficits were financed.

There were many goals of HIES-2016. Two of these are relevant to the ongoing discussion: (i) collecting data on credit and repayment situations and practices, and (ii) collecting data on household-level crises, impacts and strategies for management. 29.30 percent of the households took out loans and the average loan per household was Tk. 37743. No information on the purpose of borrowing by the households was reported. The report is also silent about the ability to repay or repay the loan. The survey did not focus on accumulated household debt, although it is of paramount importance in assessing a household’s financial viability. Tackling a deficit can be called a type of crisis because it is generally difficult to raise funds. This type of “deficit” is not present in crises. It should be noted that the collection of data on crisis management was first introduced in the 2010 survey and accordingly continued in the 2016 survey.

Despite the effects of COVID, our production wheels are moving. The per capita income has been rising steadily for a long time. BBS is preparing to carry out the Household Income and Expenditure Survey (HIES) -2021. The final report on HIES-2016 was published in June 2019. Yet the survey results still have a profound impact, despite the fact that the data was five years ago. Appropriate policies and strategies for income growth, particularly for deficit-plagued poor households, largely depend on an insightful analysis of previous income and expenditure data reported in the 2016 survey on wages and unemployment, but we do not notice any interim survey on the impact of BBS.

There is an urgent need to expand data collection on family financial management through national surveys. Determining financial status such as financial health and viability is extremely important in creating policies and strategies. Therefore, we need detailed additional data on lending operations, including past past due dates, use of loan funds, loan repayment ability, deficit financing, expenses (recurring and one-time with large outflows) etc. The HIES project 2021 is being implemented. The questionnaire should be redesigned to collect comprehensive data on the financial dimensions of households. Effective planning can never be expected without an unbiased, well thought-out and timely data generation system.

Haradhan Sarker, PhD, is a former Sonali Bank financial analyst and retired professor of management.

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