A statutory regulatory analysis of financial inclusion for the poor and low-income earners in South Africa

Abstract

Financial inclusion refers to the fair, inexpensive, timely and convenient access of basic financial services and products to all members of the society especially the poor and low-income earners. South Africa is currently facing extreme poverty and financial inclusion could be one solution to it. The poor and low-income earners in South Africa are currently financially excluded from the formal financial sector as a result of several challenges. The following challenges prohibit the promotion of financial inclusion for the poor and low-income earners in South Africa: unemployment and poverty, financial illiteracy, mistrust of the formal banking sector and fear of fraud by the illiterate people, lack of documentation for opening bank accounts, uneven concentration of banks between urban and remote areas, remoteness of financial institutions to most people, costly financial services and bank fees, over-indebtedness and lack of legislation specifically dealing with financial inclusion. Moreover, the current statutory framework regulating financial inclusion in South Africa is not robust enough to combat financial exclusion of the poor and low-income earners. Such legislation includes the South African Reserve Bank Act, the Banks Act, the Consumer Protection Act, the National Credit Act, the National Payments System Act, the Financial Intelligence Act and the Financial Sector Regulation Act. Given this background, the researcher recommends that robust financial literacy programs must be initiated by the government and relevant stakeholders, the National Credit Act and the Financial Sector Regulation Act must be amended, the government and relevant stakeholders must protect and enhance the integrity of banking institutions, the government and other relevant stakeholders must encourage and formalise stokvels, the government and other relevant stakeholders must build more banking institutions for people residing in remote areas and that specific legislation that deals with financial inclusion must be enacted. The researcher submits that the government and relevant stakeholders must address the challenges of financial inclusion of the poor and low-income earners so that 90% financial inclusion is achieved in 2030.