Johannesburg - Chief Operating Officer (COO) at digital payments platform SOLMate, Jonathan Holden, says in the context of rural South Africa, many rural communities have limited access to traditional banking services, although there has been a significant push to improve financial inclusion.
In a 2022 study by Munacinga Simatele and Loyiso Maciko, economists at the University of Fort Hare, who released a paper titled “Financial Inclusion in Rural South Africa: A Qualitative Approach”, it was found that while financial inclusion efforts had resulted in increased access to financial services, usage of those services had not necessarily followed.
South African Social Security Agency (Sassa) accounts, set up to access government grants, are similarly used: the researchers found that “in 2019, 69% of all accounts held by Sassa recipients were used only as mailboxes”.
“This proportion is much higher than the national proportion of 50%. Therefore, low-income individuals are not engaging with the accounts in a meaningful way.”
The study identified possible reasons for this lag, including supply-side factors such as distance from physical banking infrastructure and the cost of transactions, and demand-side factors such as unemployment, low and irregular incomes, financial illiteracy and perceptions of risk and trust.
According to Holden, financial inclusion plays a vital role in transforming lives and driving economic growth.
“We are proud to be at the forefront of this transformation, offering a digital wallet solution that empowers individuals and businesses. Mobile money and innovative new payment products are potential game changers in terms of meaningful financial inclusion across the region,” he said. According to a SOLMate statement, one of the key advantages of digital wallets in encouraging more people to access the financial system is their affordability.
“Maintaining a bank account can be prohibitively expensive for those living below the poverty line, and digital wallets enable marginalised populations to cheaply access essential financial services, including payments, savings and remittances. “In rural areas, where many residents rely on remittances from family members working in urban areas or abroad, digital wallets can simplify the process of receiving and sending money. By providing easier access to financial services, digital wallets help rural residents save, invest and eventually start small businesses, which also benefit from access to financial products. This can contribute to local economic growth and poverty reduction,” SOLMate said.
It pointed out that, by offering convenience, accessibility and security, digital wallets are revolutionising financial services and empowering individuals who have historically been excluded from traditional banking systems.
The Star