Charter addresses financial services for poor

Eighty percent of the poorest people in South Africa should have effective access to financial services by 2008, according to the Financial Sector Charter, which was released on Friday.

These include savings and transaction services, says the charter, which was handed to Minister of Finance Trevor Manuel.

Those targeted are the five lowest out of the nine living standard measure (LSM) categories, as classified by the All Media Product Survey (Amps).

At present, about three-quarters of this group have such access, said Cas Coovadia, general manager of transformation of the Banking Council of South Africa.

To reach the target would require about 2 500 additional transaction points, he said.

The charter defines effective access as being within 20km from a point where first-order financial services can be used. These include transaction and savings products and services; credit for low-income housing, farming or a small business; or electronic transactions (other than by automatic teller machine).

Effective access also entails non-discriminatory practices, products and services that are appropriate, affordable and easy to understand for the target group.

A percentage still has to be determined of LSM 1 to 5 households that should have effective access to life assurance products and services, the charter says.

It requires the provision of formal collective investment savings products and services for 1% of LSM 1 to 5, plus 250 000 clients from that group. 

Short-term risk insurance products and services should be provided to 6% of LSM 1 to 5.

“Each financial institution commits, from the effective date of the charter [January 1 next year] to 2008, to annually invest a minimum of 0,2% of post-tax operating profits in consumer education.”

Such education will be aimed at enabling consumers to make more informed decisions about their finances and lifestyles.

“The financial sector ... commits to the elimination of discrimination in the provision of financial services.”

The charter also includes an undertaking to support community-based financial organisations.

By 2005, the sector, together with the government, will have established standards to monitor access to its services, as well as a mechanism to evaluate the impact of its initiatives, the document says.—Sapa

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