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Banking growth has not boosted savings – survey

Financial inclusion now at 86%.

JOHANNESBURG – The number of banked South Africans has grown to 27.4 million over the past ten years, or about 75% of the total adult population, according to research from FinMark Trust.

The FinScope South Africa 2014 consumer survey reveals that over the past ten years, the growth in financial inclusion from 61% to 86% has been driven by increased access to banking products and roll out of South African Social Security Agency (SASSA) grant payments.

Thirty-four percent of the banked population own a SASSA Mastercard, with Mzansi accounts representing 6% of the market in 2013 and 4% in 2014. Growth in banking is driven mainly by ownership of ATM and debit cards.

Source: FinScope South Africa 2014 Consumer Survey

The survey is based on a nationally representative sample of 3 900 adults who are 16 years or older and reflects their perceptions of their own financial inclusion.

Speaking at the launch of the survey on Tuesday, CEO of TNS South Africa Rob Powell said that the focus was shifting to the quality of financial inclusion rather than financial inclusion itself.

While South Africa would easily reach the National Development Plan (NDP) target of 90% financial inclusion by 2030, that did not necessarily mean people were benefiting from the financial products they had, Powell said.

As a means of measuring this he suggested asking whether, if all else being equal, someone would choose the product you are offering them. If they would not, and are simply being forced to use it because of access or affordability, then it is questionable whether this really counts as financial inclusion.

Informal savings grows

Unfortunately, the increase in the banked population has not translated into a higher incidence of saving, with only 20% of banked adult South Africans saving either in banks or non-bank financial institutions.

Interestingly, 11% of adults (3.8 million) claim to save at home. “These are actually slightly higher income individuals who think that bank fees are too expensive to justify saving in a bank. They also tend to have higher debt levels and there might be a perception that if they save in a bank their creditors will be able to access that money,” Powell explained.

Burial societies have driven the increase in insurance over the past ten years among the more vulnerable, with formal funeral cover playing a secondary role due to reasons of affordability. The number of adults with medical aid has fallen to 3 million in 2014, from 3.3 million in 2004, with a number of people electing to save personally for medical expenses.

Thirty-five percent of adults have formal insurance, often funeral cover, from non-bank financial institutions, 35% belong to a burial society and 40% are not insured.

Living standards improve

Over the last ten years there has been an enhancement in living standards across the board, indicated by the 4.4 million decrease in LSM 1-5, with LSM 6-10 increasing by 12.2 million people since 2004.

Powell said these improvements have been primarily driven by access to technology and infrastructure, although the number of people earning a salary has remained fairly stagnant. “From a formalised perspective we are not seeing vast changes in wealth creation of the country, but there is better distribution of wealth through grants and money from others,” Powell said.

Part-time employment has increased significantly, while average personal income has also remained stagnant over the past ten years, when taking inflation into account.

Source: FinScope South Africa 2014 Consumer Survey

More to be done

CEO of FinMark Trust, Prega Ramsamy, said there were an estimated 80-90 million people excluded from the formal financial sector in the Southern African Development Community (SADC). “In many countries banking services are still prohibitively expensive,” he said.

The use of mobile channels led to substantial drops in cost and increased access, Ramsamy added. “MPesa is now used by 80 million Kenyans, as opposed to seven million bank accounts, processing $1.6 billion on a monthly basis. In Kenya, about 75% of the population has access to financial services,” he noted.

“Financial inclusion provides opportunities for many consumers previously excluded, but if not well managed it can undermine financial stability,” he said, referring to over-extension of credit as one example of this.

“For the first time we are beginning to talk about the risks of financial inclusion, which in the past was accepted as a good thing,” added FinMark Trust’s Brendan Pearce.



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