South Africa ranked third for digital inclusion

SOUTH Africa has been ranked among the top three countries in the world for digital and financial inclusion by Brookings Institution’s Centre for Technology Innovation (Bicti), a Washington-based non-profit organisation.

Financial and digital inclusion is defined as the digital access to and use of formal financial services by excluded and underserved populations.

South Africa took the third spot in this year’s Financial and Digital Inclusion Program rankings, with the Bicti having surveyed 26 countries across the globe. Kenya came first, while Brazil and Mexico tied for second place, and Colombia, and Uganda tied with South Africa for third.

A report released by Bicti said South Africa’s enabling regulatory environment for digital financial services was one of the factors that placed the country third in the rankings, with 70 percent of South African adults having a financial account.

Low usage

Another study by the Boston Consulting Group (BCG) found that while the majority of South Africans had access to a bank account, usage was quite low and the savings rate was among the lowest in the world.

However, experts argued that this rate did not capture the significant role of informal savings.

The BCG report found that financial inclusion percentages were relatively consistent among men and women. This was collaborated by a recent FinMark Trust report that found a positive gender gap of 6 percent between women and men in terms of bank account holdings, which showed a large adoption of social grants among women.

South Africa has taken a number of measures to ensure financial services are accessed by the majority. These included the recently approved Financial Sector Regulation Bill, which features financial inclusion among its objectives.

In July 2016, the SA Reserve Bank approved the SA Post Office’s first level application for a banking licence for Postbank, which enabled it to offer banking services beyond the transactional and savings products it currently offers.

The report said South Africa should monitor the rise in unsecured lending and consider how to best mitigate the risk of over-indebtedness, without precluding low-income consumers from accessing the services they need to support their well-being

The Economist Intelligence Unit noted in its 2016 report that the “ongoing shift from rules-based to risk-based supervision was already having an impact on financial inclusion, as banks and other financial service providers became more risk-averse and therefore less likely to extend credit to low-income consumers”.