Access to formal financial services for South Africa's poor developments since 1990

The importance of a well developed financial sector for economic development and the upliftment of the poor is widely recognised and well researched theoretically and empirically. In this context access to financial services for those normally excluded, generally the poor, has an important role to play. This is also acknowledged locally. The South African Reserve Bank (SARB), for example, has alluded to the value of broadening access to financial services and how to attain this in numerous of its Bank Supervision Department's Annual Reports. In this paper the focus falls on access, or more correctly, the problem of access to formal credit, transaction (deposit, payment) and saving services - hereafter basic banking services - for South Africa's poor (LSM categories 1-4). The more affluent do not experience serious access problems; since 2004, between 87 and 90 per cent of those classified in LSM 7-10 have had access. Access to basic banking services has increased significantly since 1990, though for the poor the improvement only came about in the latter part of the study period. Major institutional changes that have impacted on access include the exemption from the Usury Act of loans below R6 000 in 1992 and the launching of the Mzansi basic bank account in October 2004. This paper aims to describe and analyse, since 1990, the actual changes in access experienced by those previously excluded from basic formal financial services in South Africa, the demand and supply constraints to access, and government actions that have played an important role in either impeding or opening-up access.