The reasons for the low market penetration of banking services in South Africa

Abstract

It is estimated 16-million out of a potential 30-million adults in South Africa are currently unbanked. A number of collaborative initiatives between the banking sector and the government have been introduced to address the problem with limited results. This study focuses on interrogating the data obtained through the FinScope 2005 survey to challenge the assumptions on which these initiatives are based.The FinScope 2005 survey interviewed 3885 individuals across all nine provinces in South Africa. In addition to the banking status of the respondent, information was gathered on financial literacy, employment and trust in the banking segment. Frequency analysis, descriptive statistics, tests of independence and correlation matrices were used to determine the relationships between financial literacy, employment and trust and the banking status of the respondent.The respondent’s banking status was found to be dependent on financial literacy and employment but there was no evidence of dependence on trust in the banking segment. The correlation between the dependent variables was found to be low indicating that individually they do not fully explain the banking status. Further research is recommended to create a representative model.