March 13, 2008
From Business Report
By Ethel Hazelhurst
And, according to the latest FinScope annual survey, most of the new account
holders are poor, black and live in informal settlements.
The FinMark Trust, which runs the study of awareness and usage of financial
products, said the findings were derived from interviews with 3 900 people
aged 16 years and older, who made up a representative sample of the population.
The 2007 results show that increasing numbers of previously marginalised people are joining the economic mainstream and that the growth in take-up of banking services accelerated from 11 percent in 2006 to 20 percent last year.
FinMark said the low-cost basic Mzansi bank account was a driving force behind the substantial increase: more than 3 million, or one in 10 adult South Africans, now have Mzansi accounts, well over 1 million more than in 2006.
The Mzansi account was started by the banks in 2004 to provide cost-effective
services to the low-income market.
It was designed to help the banks meet their financial sector charter target of
providing bank accounts to 80 percent of people in LSM categories 1 to 5 by the end of this year.
The LSM, or living standards measure, system classifies people according to the household appliances and services they use, rather than income or demographics. LSM 1 to 5 comprises the poorest 57 percent of the population.
Banking activity remains highest among whites, with 95 percent having a bank
account, followed by 75 percent of the Indian/Asian population group, 56 percent of Africans and 54 percent of coloureds.
Despite the big increase in the number of accounts, the survey shows that use of banking services remains limited.
Rob Powell of TNS Research Surveys, which conducted the research, said: "The
extent of the engagement is debatable, as many people immediately withdraw deposits - for instance, income from social grants."
However, the correlation between being banked and having wealth has been
confirmed on an annual basis by the FinScope survey, which was first conducted nationally in 2003.
FinMark Trust chief executive Mark Napier said the rise in the number of people using bank accounts reflected the banking industry's commitment to the charter, which became effective in January 2004. It also reflected the economy's growth, which boosted incomes.
Napier said the banks still had quite a way to go to reach the 80 percent target, as FinScope 2007 showed that only 40 percent of LSM 1 to 5 people were banked.
He pointed out that LSM 1 to 5 was shrinking as people acquired new products, which moved them up the scale. By reducing the pool of potential candidates for banking within this population category, the trend made it harder for banks to extend their reach.
But the banks are persisting in their efforts. Of the new Mzansi accounts, 800 000 went to people in LSM 1 to 5, FinMark said, "suggesting the account is being well targeted".
The survey shows that there has been "a marked increase in the take-up and use of financial products" for the third consecutive year, with three out of four South Africans using some form of financial product compared with only two out of three in 2006.
Funeral cover and burial society membership has risen. FinScope shows 46 percent of adults claim to have funeral cover of some kind, up from 39 percent in the 2006 survey.
This represents more than 14.5 million people, which is relatively high compared with the use of other financial insurance products. This is partly explained by the fact that 4 percent of South Africans experienced the death of a main wage earner in the household in the year before the study.