Financial inclusion doesn’t mean ‘shoving credit down the throats of the poor’

JOHANNESBURG - South Africa’s banks need to better tailor their products to consumers’ needs to increase equality rather than just offering more credit, the central-bank governor has said.

“People think financial inclusion is like shoving credit down the throats of the poor and that is not quite financial inclusion,” Lesetja Kganyago said in a virtual event. While access to credit is very important, it must be tested against affordability, he said.

SA has battled to meaningfully include a larger portion of its population in mainstream finance, with few lower-income earners able to access loans from banks. That’s just one factor helping to maintain the nation’s position as the world’s most unequal society, a status quo that stems from the system of white minority rule which ended in 1994.

The country’s banks have also been criticised for sluggish progress in increasing black representation in their ownership structures and top management. A report by the Banking Association of South Africa found that Black ownership measures in most categories tracked declined between 2016 and 2019, though most remained above the nation’s Financial Sector Code targets.

A preoccupation with ownership in the financial industry, however, has blinded South Africans to other opportunities to foster transformation, Standard Bank Group’s South African head Lungisa Fuzile said at the same forum. – BLOOMBERG NEWS.