Financial exclusion up, formal inclusion unchanged

While overall levels of formal financial inclusion in SA were stable compared to 2010 figures, the FinScope 2011 survey - released on Wednesday - found that the percentage of adults who were financially excluded had increased.

While 73% of adults were financially included - meaning they used financial products from the formal or informal sectors, 68% used formal financial products - mainly from banks.

However, the survey concluded that there had been a decrease in the informally served market, leading to a rise in the number of South Africans that were financially excluded and who kept money in a safe place at home.

According to the survey, 27% of South African adults (just over nine million) were financially excluded in 2011, up from 23.4% (almost eight million) in 2010.

The survey also found that Mzansi account awareness and usage had decreased from last year.

"This raises an important question that needs to be understood further and that is: Are banks substituting Mzansi accounts with in-house entry level banking products or are Mzansi accounts becoming dormant?"

FinScope said this was "significant" especially since the Financial Sector Charter required the banking sector to make banking more accessible to South Africans.

It was found that 36% of individuals had never heard of the account before and those who used it, often indicated that it was their first account.

The majority of individuals who had not heard of Mzansi fell within the LSM [living standards measure] four to six range.

"This particular market is concerned with fees, and trust in a product, and in financial institutions will impact decision-making.

"Furthermore, the research indicates that banks seem to be encouraging their clients less to take up Mzansi accounts than in 2010. It is also often the case that the banks will persuade clients not to open this account."

The survey also found that 57% of the adult population in the country did not have any form of insurance in 2011 compared to 50% in 2010.

The percentage of South African adults making use of formal insurance products also dropped from 40% in 2010 to 34% in 2011.

"Perceptions of insurance products are generally quite positive and they are mainly associated with protection from risk, safety and reliability.

"On a functional level, insurance seems to be more likely to be associated with funeral cover, followed by an understanding of insurance as a savings and investment mechanism."

The survey revealed that many South Africans saw death in the family, funeral expenses and loss of the main income earner as a main threat to their livelihoods or income.

FinScope said that in terms of livelihood drivers of financial inclusion, the survey indicated that financial literacy was vital.

"Those served informally have a negative perception about informal services and those who are financially excluded lack support and the capacity to work - they also generally have a negative outlook on life."

The most significant predictors of formal financial inclusion identified in the latest survey included financial literacy, the ability to save money, access to facilities such as water, sanitation and electricity as well as the position held within the household.

The survey concluded that there were three key interventions possible to increase financial inclusion in SA in a sustainable way.

These included building capacity through financial literacy programmes where it was lacking, providing financial products, services or mechanisms that served a specific need and removing barriers, in particular, regulatory barriers to create a conducive and enabling environment for financial inclusion.

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