South Africa’s banked population revealed

South Africa’s banked population has grown by 1.3 million in 2012‚ according to FinMark Trust’s FinScope South Africa survey.

Altogether‚ there are now 22.5 million banked adults in South Africa‚ or 67% out of a total 16+ population of 33.7 million (Stats SA 2011 mid-year population estimate).

This means there are now almost 10 million more adults in the banking system than in 2004‚ when 13 million adults‚ or 46% of the population‚ were banked.

The key banking development in 2012‚ the survey found‚ is the roll-out of the new South African Social Security Agency (SASSA) MasterCard.

Three in four (75%) social grant holders or 7.4 million are now banked – up from 60% or 5 million in 2011. More women (69%) than men (64%) are now banked – and there is further room for growth‚ with 7%‚ or 2.4 million‚ of the adult population in South Africa being unbanked social grant holders‚ the survey showed.

Nine out of ten (88%) banked adults claim to withdraw money from an ATM at least once a month, and 25% claim to get cash at a store till using a bank card. Only 13% claim to use cellphone banking.

The big challenge is to get people‚ including banked people‚ to meaningfully engage financially by transacting frequently rather than withdrawing all their money at once, the survey said.

A third (34%) of the banked‚ or 7.3 million people‚ agree with the statement “as soon as money is deposited into your account‚ you take all of it out”. There are 9.8 million people in South Africa who have basic transactional bank accounts and no other kind of formal financial product.

Retirement

Other findings of the survey revealed that, despite coming from a low base‚ there has been impressive growth since 2004 in the penetration of pension funds (9% to 12%)‚ provident funds (6% to 10%) and retirement annuities (6% to 9%).

Membership of informal savings or investment groups and stokvels has also grown from 7% in 2004 to 11% in 2012.

Long-term savings is still a challenge for the majority of South Africans though. The survey reveals that half (48%) of South African adults are worried that they won’t have enough money for old age or retirement and 83% do not have any formal retirement product. Only 25% of adults claim to have enough money to save after covering all their spending needs.

There is scope for far greater take-up of formal retirement products: whereas 52% of wage or salary workers personally earning R2‚000 or more per month have some form of formal retirement product‚ only 16% of non-salary earners in the same income bracket do.

The survey also found that, since 2004‚ personal life insurance has increased from 11% to 13%. Furthermore‚ an additional 3% of South African adults claim to be covered by life insurance in someone else’s name.

Cause for concern

But Finmark said that, despite the impressive progress made since 2004 on financial inclusion‚ there are still areas that create cause for concern. It pointed out that only 29% of South African adults are engaged in full-time employment.

This places limits on the roll-out of many financial products. Furthermore‚ one in five (21%)‚ or 7.2 million adults‚ fall into LSM 1-4. Sixty-two percent of this group live in regions that Statistics South Africa classifies as Tribal Land‚ 40% do not have electricity and only 21% earn a salary or wage.

“The challenge in engaging this group is apparent when we consider that the average time for a South African adult to get to a supermarket‚ ATM or post office is 23 minutes‚ but this doubles to 46 minutes amongst those in LSM 1-4‚” FinMark said.

“Looking forward‚ if we are to make financial markets work for the poor‚ we should expect a greater role for relevant touchpoints such as stokvels‚ burial societies‚ churches‚ post office branches and retail channels to reach people better.”

“The successful roll-out of such a strategy will require education of those people in the frontline – retail managers and cashiers‚ custodians and members of informal groups – in order to extend appropriate products and mechanisms to end-consumers.”

“As we enter the second decade of FinScope studies‚ the challenge will be to deepen financial engagement further in order to better meet the full set of needs of our people‚” FinMark added.

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South Africa’s banked population revealed