Moneyweb’s Lindo Xulu reports:

“When it comes to entry level banking it’s all about getting the right model, once you’ve done that you can apply it on scale,” says Gerhard Coetzee Absa’sspecialist adviser on inclusive banking. With a somewhat high degree of saturation at the top end of the market Absa has joined the rush for the high risk, high reward entry-level market.

If one focuses on the savings side research suggests that the big four already reach 60% of bankable South Africans the highest penetration rate on the continent. According to Coetzee, “when we analysed the low-income and poor portion of the 11m Absa clients in South Africa, we found that of the 7m clients that can be defined as low-income and poor, about 27% earn a monthly individual income of up to R1 000.  This means that there is already a good reach into the largely employed part of the poor and low-income market.”

Providing banking to this market has proven extremely difficult, but when one takes a closer look at the Absa figures, of the 7m low-income clients on Absa’s books only 27% earn between R371 – R928. According to the 2009 Finscope research, 21.1m South Africans fall under the financial services measure (FSM) 1-3. This category describes people who are formally unbanked/under banked, unemployed/seasonal labourers. On average these people earn between R371 – R928 per month.”

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