Efforts to foster financial inclusion in South Africa are hampered by the high levels of inequality and poor education, says Mamphela Ramphele.
Speaking at the recent Critical Thinking Forum hosted by Nedbank and Old Mutual, Ramphele said “If one also looks at today’s graduates, young professionals, and budding entrepreneurs, they are all heavily indebted because they are trying to keep up with the Jones’s. All these are signs of the cost of inequality. Therefore, the focus needs to be on strengthening the foundations of the economy as well as the empowerment of participants to actively partake in the system.”
The latest FinScope report indicates that 19% of 16 to 19 year olds depend on government grants whilst a further 49% relies on others for money. Furthermore, the World Economic Forum recently rated the quality of South Africa’s maths and science education last-amongst 62 countries. The combination of these factors makes it increasingly difficult for consumers who do not have adequate literacy or income to fully comprehend financial concepts and thereby participate in the economy.
Ramphele said education will play a key role in ensuring that financial inclusion is realised and encouraged the financial services sector to collaborate with the government in developing a sustainable model to address the challenges.
Her views resonated with Ingrid Goodspeed, Chief Director of Financial Inclusion and Market Conduct at National Treasury, who commended the current financial literacy programmes that have been rolled out by banking institutions such as Nedbank and Old Mutual. “As National Treasury, we believe that the myriad of programmes need to be revised in order to include those who are out of school but vulnerable to unscrupulous activities,” she said.
Mandla Zwane, Head of Strategic Relationships and Customer Education said Nedbank recently conducted a home loan consumer education programme to educate people about borrowing but surprisingly, many of the participants were not interested in absorbing the content but simply wanted the certificate so that they can access a loan. This, he said speaks to the need for financial institutions to change their adverse attitude towards consumer education and start appreciating the value of being financially fit.
Old Mutual’s director of marketing, communications and corporate affairs, Mohale Ralebitso similarly cautioned against the misconception that its only entry level segments that need financial education, “We find that there are very high income earners who are not significant savers, relative to their saving potential. Therefore, what this tells us is that financial education is necessary across different income segments”.
Nedbank’s Thulani Sibeko, group executive for marketing, communications and corporate affairs highlighted that “simplicity and transparency of offerings are two of the most important factors in ensuring successful financial education. We cannot overstate the need to match clients to the right products because this mitigates the long term burden of clients incurring unnecessary costs.”