Achieving Effective Financial Inclusion in South Africa

The objective of the South Africa Financial Sector Development and Reform Program is to assist the Government in strengthening financial stability and improving financial inclusion, through analytical and advisory services. It is expected that advancing a sound and inclusive financial sector will support the development needs of the economy as well as South Africa’s poverty reduction goals. The program has two main pillars that focus on: (i) financial sector regulation, integrity and stability; and, (ii) financial inclusion. For each of the pillars, a combination of analytical and diagnostic work, policy advice, and technical assistance has been envisaged. One of the activities under the financial inclusion pillar aims to assess how effective financial inclusion in South Africa can be achieved from a payments perspective. 2. A transaction account is an essential financial service that can serve as a gateway to other financial services such as savings, credit and insurance. However, nearly 40% of the world’s adult population – about 2 billion people – still have no account with a bank or authorized non-bank service provider. 3. Four payment systems specialists from the World Bank visited South Africa in August and November 2015 to conduct a review of the National Payments System and to make recommendations for possible improvements in view of how effective financial inclusion can be achieved from a payments perspective. Numerous discussions with public and private sector stakeholders were held and the team considers that it has gathered representative opinions from different participants on the current status of the market and on-going reforms. 4. This report presents the results of the analysis, which was based on the recently released CPMI-World Bank report “Payment Aspects of Financial Inclusion”, and benefits from best practices of which the World Bank has experience in other countries. The PAFI report, in addition to outlining principles to help countries advance financial inclusion, suggests possible key actions, including providing basic accounts at little or no cost, stepping up efforts to increase financial literacy, and leveraging large-volume payment programs, such as government payments, by adopting electronic payment services. Financial inclusion efforts are beneficial not only for those who will become financially included, but also for the national payments infrastructure and, ultimately, the economy. 5. This report is organized as follows.