SA’s poor save, one way or another

A peek into the financial lives of some of South Africa’s poorest households reveals more than many people might think. A complex patchwork of financial instruments and devices are used by the country’s less fortunate not just to get by but also to save.

In-depth tracking of household cash flows, or financial diaries, of 67 Soweto households conducted by the Bankable Frontier Associates, a global strategy consultancy, over nine months showed that emerging consumers, most living below the international guideline poverty threshold of $2 a day, used a mix of formal and informal devices to suit their needs.

Although almost all respondents hid money in several places around the house, 76% also had bank accounts, more than 50% belonged to a burial society, 30% had a funeral plan and less than 50% belonged to some kind of stokvel.

Of the three common types of savings identified in emerging markets by the Gateway Financial Innovations for Savings project, savings clubs such as stokvels are extremely popular in the developing world, particularly in Kenya and South Africa.

It is estimated some R44.6-billion per year is stashed away in South Africa’s stokvels — even though the return is low, or often nonexistent, it is favoured as a way to put a little bit of money away each month.


Daryl Collins, director of Bankable Frontier, the organisation managing the project, said that it was how the poor preferred to save: the first financial service they required was not credit but simply a place to keep their money.

Common practice
Collins said it was common practice, especially for these kinds of households, to save despite most of their expenditure going to food and transport.

“People with low or irregular incomes are saving to make sure they can map those times when there is not enough. Or you find they borrow where they can sustain themselves … We are not talking about putting money into a retirement annuity — usually the savings don’t tend to be longer than a year.”

Bankable Frontier is currently ­carrying out financial diary exercises in India, Mexico, Kenya and the United States.

“Across cultures and countries — you’d be surprised,” Collins said. “East Africans and South Africans tend to save more than they borrow.”

The inverse was true for many other emerging market consumers, she said. Audrey Mothupi, head of inclusive banking at Standard Bank South Africa, said the findings surprised the bank itself, which commissioned the study.

She said many surveys showed that the majority of respondents said they didn’t save but, when spending time in the households and documenting their financial behaviour in a detailed manner, it was clear there was conscious financial management.

Access Accoount
Mothupi said banks had to look at offerings that mimicked existing consumer financial behaviour.

The bank’s low-end offering, known as the Access Account, was aimed at achieving this. First and foremost, monthly fees had to be eliminated.

“Another thing we realised very quickly ­— the language you use, the way you define the product, is important. You shouldn’t talk about interest; you should talk about ‘cash bonus’.”

The product also had to be a one-stop solution — where consumers could save and transact, and also access credit if they wanted to.

“You’re not looking to make money first. It is about getting money in accounts and out from under mattresses,” Collins said, although she acknowledged the money would help to swell a bank’s deposit base.

“At home, people are doing what we have designed the product to be,” Mothupi said.

For example, a seven-day cooling-off period was designed to mimic the function of a money guard in a community — someone who would keep money on your behalf and not hand it over to you in times of difficulty.

Trust was an issue, Collins said, but the smaller financial institutions were not in fact better at serving the poor, from whom they made their money.

She said large commercial banks had a role to play and could serve communities better, particularly with services to complement existing financial management behaviour.

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Related stories

Deconstructing South Africa’s construction industry performance

The construction industry has contracted sharply, partly due to Covid, and needs to rebalance its focus if it wants to survive

Editorial: SA will be bankrupted by looters

The chickens have finally come home to roost: if we do not end the looting, it will end us

Africa needs businesses that build and strengthen the continent

Africans should know by now that they can’t depend on leaders and should rather learn to do it themselves

Zuma vs Ramaphosa? Neither is the leader South Africans deserve

Neither statesman could command sufficient authority in an ANC that remains mired in corruption and infighting and at the behest of big capital

E-payments for the unbanked are booming

The pandemic is providing mobile phone network operators with a unique chance to partner with fintech firms and banks to deliver clever e-commerce solutions to the informal sector in Africa

Hate speech and LGBTI rights: perspectives from the Jon Qwelane case

South Africa has an obligation to prohibit hate speech under international law, including against LGBTI persons. But now the Constitutional Court has to decide whether the hate speech provision is constitutional
Advertising

Subscribers only

SAA bailout raises more questions

As the government continues to grapple with the troubles facing the airline, it would do well to keep on eye on the impending Denel implosion

ANC’s rogue deployees revealed

Despite 6 300 ANC cadres working in government, the party’s integrity committee has done little to deal with its accused members

More top stories

It’s not a ‘second wave’: Covid resurges because safety measures...

A simple model shows how complacency in South Africa will cause the number of infections to go on an upward trend again

Unisa shortlists two candidates for the vice-chancellor job

The outgoing vice-chancellor’s term has been extended to April to allow for a smooth hand-over

How US foreign policy under Donald Trump has affected Africa

Lesotho has been used as a microcosm in this article to reflect how the foreign policy has affected Africa

Trouble brewing for Kenya’s coffee growers

Kenyan farmers say theft of their crop is endemic – and they suspect collusion
Advertising

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday