of the Mzansi account
31 March 2009
Ladies and gentlemen, comrades and friends
It is indeed an honour to be part of this occasion that marks the launch of
major new research into the effectiveness of the Mzansi bank account and
particularly to share on the successes achieved, as well as the challenges that
may have been endured in providing affordable, accessible and appropriate
financial services to our people.
Firstly I must salute the Finmark Trust for spearheading this research
innovation. The Finmark Trust has become one of the key organisations with whom
the National Treasury shares the quest for financial inclusion as a common
goal, and I encourage this continued collaboration between our two
organisations.
It has been a good four and a half years since the launch of this remarkable
initiative meant to afford historically disadvantaged South Africans the
opportunity to open and operate a low cost banking account. Therefore, it is
quite timely that the Finmark Trust is able to present to us this empirical
assessment of the Mzansi account initiative. I hope that this assessment will
provide us with the necessary feedback required to further refine this novel
product, ultimately improving the lives of the people who use it. Without this
evaluation, we as policy makers, and the sector as a whole, may remain in the
dark about the effectiveness and sustainability of new products and services
that have been introduced to improve access to financial services.
Background
The world is struggling with the worst financial crisis in almost a hundred
years. This crisis has led to a downward spiral of the world economy in
proportions not seen in many years. To address this crisis and in an effort to
revive the world economy, leaders of the G20 will meet again this week at a
summit. They are expected to finalise a consolidated economic recovery plan and
regulation enhancement framework, introduced in November last year.
Internationally, governments have introduced significantly high injections of
capital into their financial systems, essentially to promote access to
financial services for households and boost economic growth and business
sustainability.
South Africa, as with a few other emerging economies, has not been directly
affected by this financial crisis. However, the country has to address the
second round effects of the crisis such as a slowing domestic economic growth
rate and rising unemployment. As with other central banks around the world, the
Monetary Policy Committee of the South African Reserve Bank reduced the
repurchase rate by 100 basis points on Tuesday last week. That decision is
expected to contribute towards the resuscitation of domestic growth and promote
employment creation.
In attempting to revitalise the world economy, promoting access to financial
services has become a central feature of the financial packages by world
leaders. It is interesting to note that in normal times, access to finance is
usually put on the back banner by policy-makers around the world. However, in
this financial crisis, promoting access to finance is used as a key instrument
to resuscitate the world economy.
The Mzansi initiative
The National Treasury welcomed the Mzansi initiative as it fitted well with
the financial access policy trajectory we had set for ourselves. However, as
policy makers, we have to continuously re-evaluate our role in ensuring that
the financial sectorâs market-led growth addresses problems of financial
exclusion and leads to the availability of financial services for all. In fact,
our guiding principles for financial inclusion relate not only to ensuring that
we catalyse and facilitate market mechanisms, but also intervene to address
market failures.
This market failure manifested itself in the proportion of the adult
population without access to banking services. Prior to the introduction of the
Mzansi account initiative close to half of our adult population did not have
access to a basic bank account.
Before the introduction of the Financial Sector Charter initiative, our
financial system did not provide financial services to disadvantaged members of
our society, who either did not have formal jobs or belonged to the very low
income categories. Only those members of society fortunate enough to hold
formal jobs could open and operate bank accounts. This was clearly contrary to
policy objectives of making financial services available to all sections of our
population. We envisage a nation in which basic financial services are
accessible and affordable for all. The Mzansi initiative was celebrated as an
effort to include financially all our citizens.
Policy interventions
India captured the limelight in the early 1990s as a result of the
introduction of rural banking initiatives to accommodate members of its society
that previously did not have access to appropriate financial services. The
United State (US) also made interventions to ensure financial inclusion by way
of the Community Reinvestment Act of 1977. Countries like France also make it a
statutory requirement for every adult to have a bank account. Closer to home,
Zambia embarked on a drive to effect cash transfers to beneficiaries of social
security grants through the use of mobile bank branches set up at schools and
clinics, in order to minimise the transport and transaction costs of the grant
beneficiaries.
Both the Indian and Zambian examples emphasise that banking initiatives
specifically targeting previously excluded members of society should not only
be convenient for the users, but should also minimise their transaction
costs.
It is therefore commendable that South Africa has its own unique initiative,
catering specifically to the needs and dynamics of our nation. This shows our
recognition that financial development is a key ingredient for economic
development. A society with an undeveloped financial system is bound to
experience a slower pace of growth in the real sectors of the economy. The
financial inclusion presented by Mzansi accounts makes a much needed
contribution towards the economic development of the country.
What perhaps made our financial exclusion more unpalatable is the fact that
it coexisted with a well developed financial system by world standards whether
you look at our total sector assets, the adoption of international regulatory
standards, an efficient and world class stock exchange or our well functioning
national payment system.
It is a documented fact that financial inclusion has unlimited spin offs in
terms of its contribution to the reduction of poverty and inequality. Besides
these recognised economic benefits, financial inclusion has the potential to
destigmatise the financial sector and reverse the alienation and vulnerability
associated with financial exclusion. When people are excluded from the
financial system, they resort to all forms and means of transacting, from
keeping their money under mattresses to sending monies to their families using
taxi drivers and other informal means. These forms of transacting are not only
inconvenient, but also fraught with many risks.
When it was introduced in 2004, the Mzansi account was one with no frills
but limited functionality, designed primarily as a transaction account. Over
the past three years, the functionality of the account has been enhanced to
include stop order and debit order facilities.
Our vision for financial inclusion
It is acknowledged that South Africa as a country does not have a savings
culture. Initiatives such as the Mzansi account therefore serve as crucial
building platforms from which a culture of saving can be launched. It would be
perverse to expect ordinary citizens to save when they are denied access to a
basic savings account.
We all need to strive for a South Africa where everyone, regardless of
income or financial position, is afforded the opportunity to operate a bank
account. In the absence of appropriate access, our people would continue to be
marginalised and inconvenienced. Not only does the difficulty in accessing
financial services have the potential to disrupt the lives of our people, it
also has the potential to disrupt our economy.
Our vision for financial inclusion entails a continuous process of expanding
access to and use of financial services and products. Access to a basic bank
account can help in the opening of floodgates so that our people are able to
access a myriad of other financial services for their benefit. Over time, the
banks will be able to track the profiles and savings patterns of their
customers, and thus establish a credit potential for them. It is an established
fact that access to credit is associated with benefits such as small business
financing or the smoothening of spending for household consumption.
The initiative will also pave the way for people to access insurance
products.
We need to monitor developments in these indicators of financial access, not
only to flag up key trends, but to understand financial behaviour in a way that
helps in formulating appropriate policy responses.
Advances made by Mzansi
The number of accounts opened has surpassed six million since the launch of
the Mzansi initiative. This vindicates our position that historically
disadvantaged members of our population can be harnessed into a potentially
viable market.
We have always maintained that the size and level of activity in what is
commonly referred to as the informal sector indicates that there is sufficient
appetite for financial services. This appetite has however not been duly
satisfied due to inappropriate formal provision of financial products and
services. We therefore need to continue to develop innovative products and
services that are specifically targeted at this low income segment of the
population.
Conclusion
As we celebrate the successes that we have enjoyed, we are aware that there
are challenges that still lie ahead. The development of our financial landscape
is too important for us to surrender to any setbacks. We must keep up the
fight.
I urge each and every one of us to strive to enhance competitive practices
within the financial services sector through the introduction of new and
innovative products, so that our people can truly and fully enjoy the fruits of
financial freedom.
As I conclude, let me reiterate that government remains committed to
supporting initiatives like the Mzansi accounts. We are one united nation that
is best served by one financial landscape. Our resolve should therefore remain
that of uplifting our people out of poverty by all means.
Thank you
Issued by: National Treasury
31 March 2009
