Financial Inclusion in SA: How do we get there?
While National Savings Month in July throws the spotlight on the financial behaviour of the nation, the legacy of financial exclusion is far-reaching and its broader implications for the future of South Africa need to be addressed.
This is the view of Lizl Budhram, Head of Advice at Old Mutual Personal Finance, who says that equal access to financial solutions and services is an integral part of driving the inclusive growth necessary to meet South Africa’s economic goals by 2030.
The journey to financial inclusion – and easy and affordable access to financial products and services – faces a number of challenges in the South African context. Budhram believes that the key to meeting financial needs in a responsible, sustainable way is financial education.
“To create wealth you need first of all to know and understand the basics of managing money better. You only need to look at the size of the informal savings market or stokvel industry – currently estimated at 800 000 stokvels – to realise the opportunity thousands of South Africans have to build on the positive behaviour of regular savings. The traditional, peer-based savings platform can act as a foundation for enhanced financial education, financial education and, for a growing percentage of the group, wealth creation,” Budhram says.
“While the stokvel industry is evolving rapidly to include savings strategies geared to growing wealth, the reality is that only 4% of these stokvels are used as return-generating investment clubs – with the majority of them still used for burial societies and grocery clubs.”
She says the financial services industry and, more specifically, financial product providers and advisers have a responsibility to democratise quality financial services and provide information, education and opportunity for all.
With the implementation of the Twin Peaks regulation that came into effect earlier this year, as well as a more focused approach to good corporate governance, there is an even greater emphasis on the importance of providing equal opportunities for future wealth creation to all sectors of society.
“This is encouraging,” says Budhram. “As an organisation that is passionate about the growth of both the local economy and that of the African continent as a whole, we believe this is an extremely important function of our core business.”
Incentivised financial education can play a critical role in driving the shift from a short-term, spending mentality to a sustainable, long-term savings mind-set, she says.
This is the rationale behind the recently launched Old Mutual Rewards - an incentive programme aimed at improving South Africans’ basic financial literacy and rewarding them for good financial behaviour.
Budhram says customers need to remember that not all rewards programmes are equal – and it is important to use one that aligns with your personal goals. “Finding an incentive programme that goes beyond the instant gratification of physical rewards is important for customers. Providing long-term value through upskilling, educating and providing opportunities to create wealth through re-investing earned points into an actual investment account is worth far more than a free cup of coffee.”
That said, Budhram points out that while corporate South Africa has a responsibility to provide the necessary tools to help South Africans engage more with their own financial journeys, it is ultimately the customers’ responsibility to take ownership of their own future.
“We want to partner with our customers to ensure they receive the best advice to help them achieve their goals – and then reward them for taking the steps to do so. Similarly, we want advisers to think of themselves as personal coaches to their customers – teaching and guiding them to make the best decisions to build and secure their future wealth. An effective reward programme is an enabler of this.”
Budhram is confident that encouraging and incentivising South Africans to make smart money decisions will bring the nation closer to its vision of financial inclusion. “Completing easy-to-understand financial literacy short courses and using the handy money management tools available will help many South Africans take the first steps towards creating wealth.”
Supplied by Old Mutual