Africa becomes financially hip
VISA's research indicates that contrary to the belief that access to banking is at very low levels, Africans are fast becoming more and more "financially hip" with many African countries embracing new technology as the rise of plastic money comes to the fore.
Africa is a home to a hub of entrepreneurial economies. More people are realising the implications of reduced fraud and increased efficiency that comes with point of sale (POS) purchases and using cards over cash. According to Finscope's recent survey on Supporting Financial Access to measure inclusion in the banking system across Africa, it was found that 60% of the South African population is banked, with Kenya having a 62% inclusion and Botswana 54%. These figures indicate that the inclusion of people in the banking sector is growing.
With an ever increasing telecommunications platform, greater participation in global markets and acceptance of open market practices; it is no surprise that the uptake and use of technology to improve services and delivery is extensive on the continent. According to Nick Essame, Head of Innovation Payments at Visa, “These factors have impacted the banking sector in South Africa and Africa and electronic payment services company Visa, are helping to bring more people into the formal banking market at lower costs.” Extending formal electronic payments to the financially underserved can reduce the social and economic impact of financial exclusion in countries worldwide. Research has shown that each dollar deposited in a bank results in $10 to $15 more credit and subsequent economic output.
Typically, the most common reasons for being unbanked in Africa are income, lack of financial literacy, proximity to banking services, not meeting eligibility requirements and skepticism of bank charges. For more than a decade, Visa has been developing educational programmes in Africa that teach important lessons and encourage financial responsibility and inclusion. “With projects such as Visa's financial literacy roadshows, new prepaid card offerings and massive growth in infrastructure, this landscape is evolving with more people benefiting from inclusion in the financial system,” adds Essame. FinScope research indicated that 60% of South African adults had a bank account in 2007, up from 51% in 2006, and 47% in 2005. (FinScope 2007, 2006, 2005). Further to this people claiming to be banked in LSM 1-5 has risen from 35% in 2006 to almost 50% in 2008. (FinScope 2008)
While the future of access to banking will continue to be reliant on infrastructure, other factors such as clear regulations, transparent fees, informed customers and clear credit application guidelines will be crucial. These are factors that need to be considered carefully as the African continent continues to thrive and grow.
South Africa, in particular, is a leader in making use of the latest technology, yet Africa is not as far behind as we would imagine.
According to research conducted by the World Bank in November 2008 entitled “Banking the Poor,” South Africa is the richest country on the continent with a per capita income more than ten times that of Chad. Mauritius, although second in line to South Africa on the wealth scale, has far more financial access than South Africa. According to the same research, investigating access to banking in 35 African countries, it takes 2.8 days to open a bank account in South Africa while in Ethiopa it takes a mere 0.6 days. Although this figure is reliant on the accessibility of banking, it sends a clear message that things are moving along faster than we think on the continent.
