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SA Reserve Bank governor Lesetja Kganyago. Picture: TREVOR SAMSON
SA Reserve Bank governor Lesetja Kganyago. Picture: TREVOR SAMSON

In an SA context financial inclusion — defined as the delivery of affordable and accessible financial services and products — is largely underpinned by banking, which remains the country’s most used financial service.

While financial exclusion remains a problem in SA, progress is being made. The National Treasury’s draft financial inclusion policy, submitted in 2020, stated that at least 91% of SA adults have been formally included in its financial system, with only about 2.9-million still excluded.

Yet the policy makes clear that among the 91% defined as “included”, only 81% have a bank account. Seventy-eight percent use nonbank channels, while 61% still use informal channels. If SA’s social grant beneficiaries are excluded from banking institutions, only 68% of adults are considered banked.

The policy highlights that the danger lies in the fact that those who are not considered formally “banked” are dependent on the cash economy, and are therefore more likely to turn to high risk or inadequate financial services prolific in the informal banking sector. 

Added to this is our population’s notoriously poor saving habits, and tendency to abuse credit. The National Credit Regulator recently revealed that more than 10-million South Africans have unfavourable credit records, and warned that with the winding down of the payment holidays and debt relief measures introduced in the early stages of the pandemic, consumer indebtedness could rise further. 

Our history has robbed people of the ability to understand how they can achieve financial freedom. The gap between the haves and the have-nots is vast, and while the former largely demonstrate a solid grasp of important financial concepts that empower and underpin their decision-making, the latter — for the most part — don’t. The three steps that will be key in turning this around involve learning the fundamentals of financial decision-making, striving towards financial literacy and eventually reaching financial capability, which, in turn, will help achieve the financial inclusion of those with limited access to financial tools.

The Standard & Poor’s Global Financial Literacy Survey found that people with a solid financial literacy had a few things in common, regardless of whether from an advanced or emerging economy. The survey stated that “adults who use formal financial services like bank accounts and credit cards generally have higher financial knowledge, regardless of their income. Even poor people who have a bank account are more likely to be financially literate than poor people who do not have a bank account.”

This is reiterated in the National Treasury’s draft policy, which says that “in SA the pathway to full financial inclusion begins with the acquisition of a basic bank account and is generally followed by credit, insurance and long-term savings in the form of retirement. The pathways, however, are different for those employed, unemployed or self-employed. For example, employed individuals may access medical insurance and retirement whereas the unemployed and self-employed may have difficulty in accessing these — hence their preference for informal products and services.”

What this essentially means for me is that the pathway to all-important financial inclusion should be understood in the context of our societal differences. Though financial inclusion begins with having a basic bank account, the reality is that financial literacy is something that is practised by the employed, and with SA’s skyrocketing unemployment, poverty will continue to deepen, as will financial illiteracy — unless there is an urgent intervention. And consumer financial education is key to this. 

Democratising learning

I firmly believe that in the realm of consumer financial education Covid-19 catalysed great innovation. The rapid move towards digital tools and e-learning has aided the speed at which knowledge can be shared.

Encouragingly, a recent audit of our digital financial literacy courses showed that the completion rate compared excellently to the existing global data, with courses seeing a 30%-40% completion rate locally, comparing well against the international benchmarks of 3%-20%. This reveals that participants found our digital financial literacy courses engaging, and wanted to partake in them, thereby boosting their knowledge.

We are still in the early phases of true digital transformation, and we can expect to see more innovative content and delivery in the future. Yet, a large portion of South Africans continue to experience barriers to entry, such as access to devices and affordable data. 

People would benefit greatly from having access to digital financial education programmes that are facilitated by low- or zero-data platforms, as well as reliable networks and devices. We therefore need more collaboration from network service providers to enable the financial services industry to design and deliver financial education programmes that are accessible to all. 

The role of measurement

According to Financial Sector Transformation Council guidance notice GN500, financial education programmes may be implemented using awareness campaigns or interactive programmes. An awareness campaign could be an announcement on radio about how to save for a rainy day , where measurement is limited to the listenership on the slot during which the announcement aired. 

Financial education programmes are generally interactive and allow for a more in-depth analysis of how participants were able to engage with the content and implementation.  For example, at Momentum Metropolitan, consumer financial education forms part of our corporate social investment mandate to uplift and empower youth, who we believe are key to driving societal change.

The entrepreneurship opportunity 

As unemployment rises the solution and opportunity lie in one’s ability to earn an alternative income, become self-employed or venture into entrepreneurship. We need consumer financial education that supports the economic opportunity inherent in entrepreneurship — and from a young age — and we need policymakers to support this, through removing unnecessary red tape and barriers to business. 

Fostering financial inclusion that will end poverty is not anyone’s job, it is all of our responsibility, as government, business and private citizens. Ultimately, “we” will always be stronger than “me”. 

Klassen is specialist: consumer financial education portfolio, at Momentum Metropolitan. 

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