The Current State of Financial Inclusion in South Africa. What Are the Initiatives Being Taken for the Same?
Financial inclusion is necessary for all societies. It ensures that people in a particular society have equal opportunities when it comes to the financial services they can avail. South Africa has also been trying to improve financial inclusion in the country through programs and reports. It’s important to know where a country stands so that necessary improvements can be made. Thus, here’s an overview of the current state of financial inclusion in South Africa.
What is Financial Inclusion?
Financial inclusion is a process that aims to givea larger number of people the opportunity to manage their finances more effectively. It is achieved by providing people from low-income groups or other vulnerable communities better and more affordable financial services. They can then use these services to help improve their current standards of living. Therefore, in the long run, the particular society, on the whole, will grow, boosting the state’s economy in the process.
Financial inclusionoperates by providing people with various financial services. Some of these include affordable insurance plans, savings accounts for people from low-income groups, remittances facilities, ATM cards,market-based loan repayment plans, need-based credit facilities, and more. When financial inclusion is done right, it can help reduce the percentage of people in poverty in a country. As a result, the number of people earning a livable income will increase, creating more revenue for a country and improving the economy in the process.
Aparticular society is at a disadvantage if only peoplefrom high-income groupshave access to various financial services. This won’t help that society become more inclusive, and the possibilities of growth will be consequently low.
The South Africa National Treasury’s Report Addressed Malpractice
The South Africa National Treasury addressed some concerns about financial inclusion in South Africa in 2014. It gave an overview of some practices that financial services companies were guilty of when dealing withpeople from vulnerable communities in South Africa. Some of these practices included charging customers with high fees for opting for their financial services, practicing anaggressive debt-collection process, charging various miscellaneous fees, providing unpayable loan amounts to people (without proper warning), and more.
South African Social Security Agency Grant Program
The South African Social SecurityAgency (SASSA) created a grant program that aims to improve financial inclusionin the country. In March 2018, theSASSA made payments to 2.3 million beneficiaries. They plan on continuing that in the future as well. The aim of this program is to help people from low-income groups out of poverty and reduce the social exclusion they face because of their financial status.
Beneficiaries of this program will receive a card with the social grant present in it. The card is made in collaboration with the South African Post Office.
Why Is Financial Inclusion in South Africa Still Not Satisfactory?
While there have been some improvements in financialinclusion, there’s still much left to be desired. Here are some reasons why financial inclusion in South Africa is still not satisfactory.
People Lack Financial-Literacy
A lot of people from low-income groups in South Africa don’t have much financial-literacy. Therefore, they find it difficult to understand some of the processes of financial services because they’re not explained to them well either. As a result, it becomes easier for financial services companies to take advantage of members of vulnerable groups in South African society.
South Africa’s Two-Tier Economy Puts Vulnerable People at a Disadvantage
South Africa has a two-tier economy. There is a formal economy and an informal economy. Most people from low-income groups in South Africa are part of the informal economy. Because of that, a lot of the financial services that they do opt for are also a part of the informal economy. This means that they opt for money lending services fromloan sharks. The regulations for such financial services companies are not well-defined and are often not taken very seriously. As a result, there is often more abuse involved in financial services.
People Are Skeptical of Modern Banking Methods
A lot of people from low-income backgrounds in South Africa refrain from financial services when it’s done online or through ATM machines. Quite a few people prefer dealing with cash. Therefore, they don’t make use of the financial services that allow them to transfer money remotely.
What Are the Benefits of Financial Inclusion?
A particular society needs to incorporate serious financial inclusion schemes if it wants to grow.Here are some of the benefits of financial inclusion in South Africa.
Less Disparity Between Informal Economy and Formal Economy
South Africa’s two-tier economy can become a source of problems for people from low-income groups. This is because people often opt for financial services from loan sharks which are a part of the informal economy. Therefore, better financial inclusion will allow for there to be a better bridge between the formal and informal economies.
Improves People’s Financial Status
Financial inclusion undoubtedly provides people from low-income backgrounds with better opportunities. As a result, they’re able touse these opportunities to bring positive change in their lives. They can make better investments and increase their standard of living as a result.
Improves the Economy on the Whole
One important benefit of financial inclusion is that it improves a country’s economy.Financial inclusion helps alleviate poverty, and it improves the business of banks as well. As a result, there will be more customers at banks, allowing for better revenue for the country.
While financial inclusion in South Africahas improved, there is still a lot to be done. Other than accessible financial programs, a significant portion of the population will have to be educated on how to use financial services effectively. In order to improve the effects of financial inclusion, we should be able to analyze data we have effectively. If you’re looking for useful tools to help you analyze data, get in touch with us now.