A member of a village near Centane in the former Transkei noticed that, in winter, villagers often did not have enough money for transport to get to town to buy clothes. So he got a loan though the Nedbank Zakheleni club savings account, went to town, bought a bale of clothing and sold it in the village.
Basic business ideas like this are being facilitated by Nedbank to grow its market share among the estimated 17-million still unbanked people (politely referred to as the “foundation market”), who were previously regarded as “unbankable” and therefore unable to get credit.
Nedbank says it is adopting a “developmental approach” to this market and has entered into a joint venture with life-insurer Old Mutual, short-term insurer Mutual & Federal and their black economic empowerment (BEE) partner, the women’s empowerment group Wiphold. It is being offered through Imbizo branches — one-stop shops for financial products — to help communities and to improve peoples’ livelihoods in a sustainable, commercial way.
As the name suggests, the Imbizo concept involves calling together a community. The first of the currently five branches was established in Centane in the Eastern Cape in 2008.
Nedbank’s primary innovative product is the Zakheleni loan. Since 2008, in about 30 villages surrounding Centane, about 700 Zakheleni savings groups have been established. They are financed with loans from Nedbank, mainly for micro-business applications. Nedbank says that this initial pilot project brought it 3 500 new clients, and demand has far outstripped expectations.
Other Imbizo branches have been established in Dutywa, Mount Frere and Mbashe, all in the Eastern Cape, and one at Acornhoek in MpuÂmalanga. Although Centane is the only branch where Zakheleni loans are now prevalent, they are being introduced at the other Imbizo branches.
Nedbank hopes that, with the establishment of more branches, it will begin closing the gap between itself and its more ubiquitous competitors — Absa, Standard Bank and FNB.
Nedbank could have grown more slowly by creating a presence and offering conventional bank cards for use at ATMs. And, indeed, the most convenient product for the people of the Centane area is a debit card, which can be loaded with social grants at ATMs. In that area, 59% of people are believed to be economically inactive and at a subsistence level. Only 13% have formal employment, mostly with the state. So dependence on state grants is prevalent.
But all the major banks offer cards (mainly debit cards) on which social grants can be loaded, obviating long waits in queues.
The Imbizo approach has been much more innovative and is apparently increasingly successful. It involves intensive and patient work within a community.
It requires the recruitment of initial staff who have an intimate knowledge of an area and its people. In Centane, it helped that Gloria Serobe, the founder of Wiphold, hailed from the area but subsequent branch set-ups have been just as successful.
The Zakheleni scheme offers groups of five to 12 people a “club” savings account. Over six months, the club’s pattern of savings and the amounts that they save are established, after which Nedbank will grant an initial loan of three times the amount saved in that period (up to a maximum of R10 000), with the monthly repayment over 22 months. A second loan can be granted up to a maximum of R20 000, repayable over 32 months. The interest rate is 19%, much lower than the rate normally charged by loan sharks, hitherto the only people (besides friends or relatives) who would make this kind of loan to these people.
So far Nedbank has experienced an unprecedented 99% repayment record on time. No assets are taken into consideration in granting the loans, not even the mainly communal land in the area, or the private houses built on it.
These loans provide credit for people who are not normally considered creditworthy and it allows them to undertake micro-enterprises larger than would normally be within their reach.
Sindile Zazela is a member of one of the first Zakheleni saving clubs. He said it had “resulted in us planting different vegetables throughout the year — for instance, potatoes, butternut and cabbage — rather than just one in one season as before. There is also a big problem with drought and with pests. We need assistance with financing water tanks and Zakheleni has never let us down.”
But Zakheleni loans are not the only innovative product emerging from the Imbizo concept.
Eric Natuse, a cattle farmer, described why he had opted for a new insurance product, Village Livestock Scheme, from Mutual & Federal. He said his cattle, his main asset and means of income, were dying so he insured them. “Now if they die, I always claim, and the vet has to come to establish the cause of death. This means I have access to a vet and fewer of my cattle are dying.”
The premium is about R19 a month for cattle worth about R5 000. The average cattle farmer in the area has 10 animals. The only livestock category not covered by the scheme is chickens.
Clients recruited to the Centane Imbizo Greenshop branch are gradually introduced to the products of the joint-venture companies — products that are themselves being evolved for this new market.
The most powerful marketing tool in the area was word of mouth, said Jake Oosthuizen, Nedbank’s head of black business partners and alternative segments.
The joint venture has also had some unexpected results. For instance, it has bolstered the traditional chief system. There are about 54 chiefs in the area and Nedbank works through them to promote the clubs. For instance, every Zakheleni savings club application must be accompanied by a letter from the chief verifying the group’s residence, which is part of the bank’s security.
Nosajini Kona, a chief from the Mazeppa area, said: “You hardly see people asking each other for help with money. Rather, our people have formed savings groups. Some of the groups are planting vegetables, some are harvesting honey and some are farming. The people also now have funeral plans and the chiefs have their own burial plans. Before this, chiefs were not taken seriously.”
Oosthuizen said: “This is not a corporate social investment [CSI] project, it is a commercial venture. Nevertheless, CSI projects from the three companies are integrated into every Imbizo branch.
“It normally costs R3 to R5-million to start a branch, and three years to reach break-even. An Imbizo branch is more long-term, but probably not by much.”
The large, semi-rural plot of the Centane Imbizo branch previously housed a magistrate’s court, but was rebuilt with labour and materials from the community. Environmental design with natural light and ventilation are striking features, in line with Nedbank’s green positioning.
The Imbizo Greenshop bank and the offices for Zakheleni loans office, decked out in a locally cut eucalyptus, have a more homespun rural feel than the glossy banking halls in the rest of South Africa. All forms and promotional literature are available in isiXhosa.
But the banking section is only a smaller part of the buildings. The rest is a community hall, other offices and a seedling cultivation project started with a CSI grant from Old Mutual, which is becoming a profitable project for the group of woman who operate it.
“Previously locals had to travel to East London, 140 kilometres away, to buy seedlings for their vegetable gardens,” said Oosthuizen. “We continue to support them with training in entrepreneur skills, which they need. But there is no lack entrepreneurial motivation.”
Nedbank will open two more Imbizo branches in Ngcobo and Lusikisiki next year. The bank opens about 10 to 15 branches of all kinds a year.
Another pilot project, which has been going for almost two years, is the Kliptown Imbizo branch, the first urban trial of the Imbizo concept. Oosthuizen said that Kliptown was a relatively poor part of Soweto and client behaviour there was different and the take-up had not been as strong as in rural branches.