File picture: Denis Farrell

Johannesburg - The South African Reserve Bank is considering an application by state-owned Postbank to allow it to lend as it aims to fulfil a government pledge to use its 1 500 outlets to give poor and rural areas access to credit.

“Postbank’s goal is to provide simple, affordable banking services to the underbanked and unbanked,” acting managing director Shaheen Adam said on Friday. “Postbank is optimistic the licence will be granted in due course without in any way detracting from the independence of the Reserve Bank in exercising its mandate.”

Economists were supportive, although sceptical.

President Jacob Zuma has pledged to support small businesses with better access to credit as he tries to spur activity in an economy that contracted by 0.6 percent in the first quarter and has a 25.5 percent unemployment rate.

Established institutions such as Standard Bank and Absa did too little to lend to new entrants in the market, senior ANC officials, including former central bank governor Tito Mboweni, have said.

Mboweni said on July 29 that the government should consider buying an existing bank to allow it to achieve this goal as Postbank lacked the infrastructure or the “muscle” to compete.

It has taken about a decade to ready Postbank, a unit of the SA Post Office, to apply for the licence. This would allow it to provide financial services beyond the transactional, savings and investment accounts it currently offers. The bank had used the time to build up the reserves from which it could lend to about R1.7 billion, which would allow it to start its lending operations, Adam said.

The Reserve Bank confirmed it was considering the application, which it received in the fourth quarter of last year.

The Treasury said in response to questions that it was chairing a group, including representatives from the Department of Telecommunications and Postal Services, the Post Office and Postbank, to oversee its “corporatisation.”

If granted the licence, Postbank will have to compete with African Bank, which was rescued by the central bank last week after a record loss in its unsecured lending business triggered a 95 percent drop in the share price of its parent company over three days.

Other retail lenders include FNB, a unit of FirstRand, Nedbank and Capitec Bank.

Econometrix director and chief economist Azar Jammine said: “The issue is, the government is not answerable to shareholders. I’m not sure if giving money to black business ventures will work. Government has had Khula Enterprise Finance and the Small Enterprise Development Agency but they did not succeed that well in generating business.”

Chris Hart, an economist at Investment Solutions, said: “I like competition, it’s good. But will Postbank be competing on the same level fields? If its lending is not on a commercial basis then it will become another African Bank.”