South Africa’s Banked Population Increases

South Africa (2)

VENTURES AFRICA – South Africa’s banked population has grown by 1.3 million in 2012 from the previous year, a survey conducted by the FinMark Trust’s FinScope South Africa survey reveals.

The survey indicates that of the South Africa’s 33.7 million above 16 years population (StatsSA 2011 mid-year population estimate), 22.5 million of them are banked adults- amounting to a 67 percent increase. This means there are now almost 10 million more adults in the banking system than in 2004 when only 13 million adults (46 percent) of the population were banked.

The number of social grants holders also increased by 60 percent from 5 million in 2010 to 7.4 million in the subsequent year while 7 percent or 2.4 million of the adult population in South Africa are social grant holders.

While indicating that there is still room for more growth, the survey shows that more women (69 percent) than men (64 percent) are now banked.

Although the big-four banks in SA are all trying to migrate their clients to cheaper digital banking channels, the study shows that nine out of ten (88 percent) banked adults claim to withdraw money from an ATM at least once a month while 25 percent claim to get cash at a store till using a bank card.

Only 13 percent claim to use cellphone banking – which is the one digital avenue that reaches most South Africans across all of the income categories. The big challenge is to get people‚ including banked people‚ to meaningfully engage financially by transacting frequently rather than withdrawing all their money at once, the survey says.

A third (34 percent) of the banked‚ or 7.3 million people‚ agree with the statement “as soon as money is deposited into your account‚ you take all of it out”. There are 9.8 million people in South Africa who have basic transactional bank accounts and no other kind of formal financial product.

Membership of informal savings or investment groups and stokvels have also grown from 7 percent in 2004 to 11 percent in 2012.

The survey reveals that 48 percent of South African adults are worried that they won’t have enough money for old age or retirement while 83 percent do not have any formal retirement product. Only 25 percent of adults claim to have enough money to save after covering all their spending needs.

Meanwhile, the survey indicated that personal life insurance has increased from 11 percent in 2004 to 13 percent with 3 percent of South African adults claiming to be covered by life insurance in someone else’s name.

In spite of this, the survey revealed that despite coming from a low base‚ there has been impressive growth since 2004 in the penetration of pension funds (9 percent to 12 percent)‚ provident funds (6 percent to 10 percent) and retirement annuities (6 percent to 9 percent).

The factor to the key development of the improved bank population in 2012 was credited to the roll-out of the new South African Social Security Agency (SASSA) MasterCard.

“Looking forward‚ if we are to make financial markets work for the poor‚ we should expect a greater role for relevant touchpoints such as stokvels‚ burial societies‚ churches‚ post office branches and retail channels to reach people better. The successful roll-out of such a strategy will require education of those people in the frontline – retail managers and cashiers‚ custodians and members of informal groups – in order to extend appropriate products and mechanisms to end-consumers,” FinMark says.

“As we enter the second decade of FinScope studies‚ the challenge will be to deepen financial engagement further in order to better meet the full set of needs of our people‚” FinMark adds.

Fin Mark however posited that financial services and credit providers will need innovation to deepen inclusion and involvement of the newly banked.

According to FinMark Trust CEO Prega Ramsamy, increased access to financial services required that multiple stakeholders target areas that most needed them.

“We need to continue innovating. The number of banked adults jumped from 46% of adults in 2004 to 63% in 2011,” Ramsamy said.

Nevertheless, Cas Coovadia, FinMark Trust chairman and MD of the Banking Association of South Africa, said the banking sector in South Africa ranked among the best in terms of inclusion of citizens. He said South Africa had the second most stable banking sector in the world, behind Canada.

“We’re obviously doing something right in terms of financing. We have a well regulated banking sector and we now need to use our edge.”

He said a section of the population “will never have a bank account” but the financial services sector needed to continue being innovative in finding ways to service South Africans.