Did you know that 30% of South Africans do not have a bank account? Did you also know that 27% of those that do have a bank account withdraw money as soon as it is paid in? Financial inclusion in South Africa places the country firmly in the bottom of the table compared to other world nations, with many other similar developing nations achieving far higher levels of inclusion for their populations, even across wide socio-economic divides.
Financial literacy: A sister issue
For many years financial education has been a hot topic in South Africa. From initiatives like Operation HOPE, to educational resources such as The Money Academy created by Wonga, both charities and businesses are very keen to raise the level of financial literacy in the country. Yet the Government is still to work with charities, organisations and financial services to help roll out compulsory financial education to all school children, or to develop any other country-wide strategy to address the issue.
The cost of a fix
When it comes to financial inclusion – which goes hand in hand with financial education – Government appears to have been equally “off the ball”. A key reason behind this is the fact that educational programmes and the development of financial services which meet the needs of lower socio-economic groups, particularly in rural areas, will not be cheap.
However, compared to the long term cost of a population unable to make shrewd financial decisions, the short term cost of implementing programmes and designing suitable products is surely a savvy investment.
Saving is suffering
The low level of saving in South Africa is a good (if troubling) illustration of why better financial education and more accessible, usable financial services are so important. The recently released statistics from the Financial Literacy in South Africa report, undertaken by HSRC on behalf of the FSB reveal that only 50% of South Africans are currently making savings. The same report also revealed that just 37% of the population pay their bills on time, while an even more worrying 69% have no emergency fund or any rainy day savings.
Teaching people about the importance of saving, ensuring they understand the low level of financial support available from the state if they do not save and teaching them exactly how to make savings work for them could save the country an incredible amount of money in the long run.
Yet teaching these valuable lessons is ultimately useless if financial inclusion remains poor. If a high percentage of the population do not have access to financial products which meet their needs, managing money and making meaningful savings becomes virtually impossible.
Designing fresh products
What the portion of the population currently left out of financial services need is targeted savings products which provide flexibility – including the option to make emergency withdrawals without the application of penalty fees. Unfortunately, the creation of this type of product comes at at cost which the financial sector and the Government are currently unprepared to shoulder together.