Financial inclusion is a significant part of economic growth, social development and poverty alleviation which most countries still battle with.  It is almost impossible to discuss financial inclusion and not mention financial exclusion, which is the reason behind the concept of financial inclusion. Financial exclusion is caused by a complex set of factors which includes, amongst others, geographical exclusion resulting from branch closures; failure to qualify because of problems in supplying appropriate identity document requirements; the cost of financial products and services; and cultural and psychological barriers.

Defining financial inclusion

Financial inclusion is defined as the ability of an individual household or group to access appropriate financial service or products. This means that a household must be able to afford and access financial products without difficulty, which is only a dream for the world that we currently live in, given the number of people who do not have or own bank accounts. Without this ability, people are often referred to as financially excluded. There are about seven (7) billion people in the world and according to the Global Financial Inclusion database hosted by the World Bank, only fifty percent (50%) of adults have accounts at a formal financial institution, bank, credit union, cooperative, post office or microfinance institution.

The Development of financial services to promote financial inclusion

One of the ways in which financial institutions have tried to bridge the gap of financial inclusion is through FinTech (the digitalisation of financial services). The main FinTech product that has fostered an increase in financial inclusion is mobile money. This makes financial services more accessible and affordable.

The main regulator of financial services is the Financial Sector Regulation Act 9 of 2017 (“the FSR”). The FSR makes provision for fair practices in the financial services sector, and the act also requires the Prudential Authority to promote and support financial inclusion. This provision enhances transformation initiatives in the financial sector. One of the main pillars driving financial inclusion in South Africa is the South Africa’s National Development Plan, which intends to achieve ninety percent (90%) of quality financial inclusion by the year 2030.

The Financial Services industry implemented the Financial Sector Charter (“the Charter”) from 2004, subject to the requirements of Broad-Based Black Economic Empowerment Act of 2003 (“BBBEE)”. The Charter is a voluntary transformation policy agreed to at the National Economic Development and Labour Council (NEDLAC) to promote social and economic integration and access to the financial sector. One of the key aspects of the Charter was to provide effective and efficient financial services to previously disadvantaged groups of people.

However, the Charter expired in 2008 and was replaced by the generic Codes of Good Practice and the Financial Sector Code (“FSC”) which was gazette in 2012. The FSC obligates the financial institutions, particularly banks, to offer basic, affordable accounts that meet the requirements set by the Financial Sector Transformation Council (“FSTC”). The FSTC ensures that the financial services institutions/sector use transformative and innovative ways to include the financially excluded; this consists of the promotion of the use of digital services. This has increased the popularity of the use of mobile banking which is commonly used for its accessibility, convenience and affordability.

A large number of South Africans who do not have or own a bank account consists of the previously disadvantaged groups (e.g. Women, black people), elders and the disabled. Most of these groups receive social grants from the government. Policy makers have implemented a more affordable and accessible way for these groups of people to receive their grants. Previously, they needed to stand in long queues at post offices or designated locations to collect their grants, but now with the digitalisation of financial services, they are provided with SASSA cards (regulated in terms of the SASSA Act 9 of 2004).


These cards function as an ordinary bank card would. They allow the grant receiver to withdraw money from any bank. Due to the implementation of the SASSA cards, there has been a significant reduction in the number of people that are financially excluded.


Another contributing group to a high number of financial exclusions are young people, mostly those in tertiary. The government has tried to combat the increased number of financially excluded tertiary students, through the National Student Financial Aid Scheme (Nsfas) and made it mandatory for everyone who receives the funds to have a bank account. Failure to do so will result in the students not receiving their allowances. This strategy has also greatly improved the number of students that are financially included. These students are also provided with electronic gadgets, which makes it easier for them to access internet banking and all the other digital financial services.


Another way to improve financial inclusion is through the provision of credit. This is one of the primary aims that the National Credit Act 34 of 2005 (“NCA”), specifically, what section 3 envisaged. The NCA aims to promote and advance the social and economic welfare of South Africans; to promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry and to protect the consumer.

Financial inclusion is not about merely ensuring that individuals have access to financial services; it goes beyond that. It is inclusive of making provision for quality financial products and effective financial inclusion processes. This means that the definition of financial inclusion must be broadened to include more than just having access to a bank account but actively using the financial services provided.

The latter is advocated for by the FSTC, which further states that financial inclusion must include a clear understanding of the financial product as well as the usage of that particular product. There must be an extensive examination and appropriateness of each financial product (this is to determine the suitability of each product for different individuals). This is in line with the FSRA, which also requires regulators to promote financial inclusion across all regulated financial service providers.

The most commonly promoted financial inclusion strategies are financial literacy and the use of digital financial service. These digital financial services are mobile banking, internet banking and Automated teller machines which are subject to regulations to prevent abuse of the services (e.g. fraud, credit card scamming and system manipulation). The Financial Intelligence Centre Amendment Act 1 of 2017 (“FICA”) is currently the legislative body that promotes fair use and access to financial services and also combats any form of financial crime.


Although there has been a considerable increase in the number of financially included people through the digitalisation of financial services, universal financial inclusion is still a dream for South Africa. This is hampered by the fear of being a victim of fraud and lack of awareness of the benefits of using digital financial services for some. In contrast, others simply do not understand how to use digital financial services.

It is advisable that more awareness (financial education) be raised regarding digital financial services. This will enable the people to understand the products and services that are available to them digitally while also learning about the pros and cons of using such services.

There is a need for financial institutions to partner and integrate with more FinTech companies. This will empower them to learn and participate more in innovative ways of offering financial services and products to the people, particularly those that are disadvantaged.

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Guest Author: Yvonne Shabangu (Legal Intern at SchoemanLaw Inc – September 2020)