Financial Inclusion is more than just access to credit

It is now more than ten years since activists in a South African Communist Party (SACP) led the campaign “to make the financial sector serve the people”. The SACP successfully pressurised the community, labour, business and government to host a National Economic Development and Labour Council (NEDLAC) Financial Sector Summit in 2002.

Therein seeds were planted for various transformation initiatives in the financial sector, including the Financial Sector Charter (FSC), which have by many accounts facilitated significant advances in financial inclusion in the country.

What the activists did not know was that they were a precursor to a growing momentum internationally, that would also reverberate in the country, wherein the benefits of financial inclusion are acknowledged. Inclusive growth is also promoted with vigour by institutions such as the United Nations (UN), the International Monetary Fund (IMF), and the World Bank.

This comment piece focuses firstly on unpacking the meaning of financial inclusion, and then we outline its benefits, progress and challenges made in recent years. We also include some discussion points on a perspective on the possible priorities for the country going forward.

The Center for Financial Inclusion (CFI) defines financial inclusion as a means to providing access to a full suite of quality financial services to everyone who can use them, and making sure that people have the tools they need to manage their financial and economic lives.


This definition is useful because it reflects how financial inclusion is a multi-dimensional concept; it speaks to the importance of making formal financial services available, accessible and affordable to all segments of the population.

It is also important to note that financial inclusion is more than “access to credit”. Inclusive growth also means enhanced access to savings and risk mitigation products. This means that those who were previously marginalised will also have access to a well-functioning financial infrastructure that allows individuals and companies to engage more actively in the economy, while protecting users’ rights’.

Financial inclusion is not just about the banks or access to credit no matter their significance in a country’s economic landscape but is critical for reducing inequality, improving the welfare of societies and overall economic development.

On the other hand, financial inclusion also has a direct impact as an element of a pro-poor development strategy. For example, some have argued correctly that ‘access to formal financial institutions allows poor households to expand consumption, absorb disruptive shocks, manage risks and invest in durable goods, health and education’.

We are all aware that South Africa’s fairly robust banking infrastructure, high levels of formal financial account ownership, and high mobile phone usage. A study by FinMark Trust shows that as of 2014, about 70% of adults age 15 and older in South Africa had an account with a financial institution or mobile money provider and that about 77% of adults age 16 and older had bank products in 2015. This is a marked improvement from the reported 46% in 2004, however, challenges remain.

Access to traditional financial services in sub-Saharan African countries remains low and the share of the population having an account at, or borrowing from, a financial institution is low compared with other developed countries. Access to financial services is higher by large margins for the more educated, the top 60% earners, and men. Access is particularly low in rural areas because branches are mostly concentrated in urban areas and non-affluent South Africans’ engagement with finance has been largely to get funeral cover. Data on the trends in rural areas and for women are somewhat harder to access but one would be surprised if SA did not mirror the pattern of marginalization and exclusion seen in other parts of the continent.

The Way forward – towards a perspective on an SA agenda
A discussion of the structure of the SA financial sector and its evolution from apartheid to the present period is important for the advancement of the financial inclusion agenda. Ideally, this discussion would look at issues relating to ownership, barriers to entry, loans for low-income housing, agriculture and black SMMEs, empowerment financing and BEE transaction financing.

Despite being on the local and global agenda, universal access to financial services is lagging with a reported close to 2-billion adults around the world still lacking access to an account.

South Africa needs to ensure that the new technologies and communications infrastructure afforded to the financial sector do not simply build on past inequalities especially by income, race, age, gender, spatial location and so on. These new developments and innovation must be used to reduce the gaps and inequalities, e.g. advances in digital technology and mobile telephony.

Finally, the provision of access to new and quality products must go hand in hand with consumer education and protection. We need to prevent the problems of borrower over-indebtedness where a bleak outlook for the economy and increasing unemployment is associated with increasing numbers of middle-class and working-class households becoming increasingly indebted. We all know that these can plant seeds for instability and chaos that the country can ill-afford.

Muzi Maziya is an economist and a director of Mazra Solutions, an emerging boutique strategic management and economic consultancy firm that is also involved in facilitating financial literacy skills workshops for rural communities. He is a co-author of the book Fighting Poverty: Labour markets and Inequality in South Africa and contributed Making Mistakes and Righting Wrongs: Insights into Black Economic Empowerment”.

Thuletho Zwane is an economist at Mazra Solutions. She has written for the Mail & Guardian, City Press and Business Day.

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