The World Bank defines financial inclusion as “individuals and businesses having access to useful and affordable financial products and services that meet their needs.” Financial inclusion is about delivering appropriate, responsible and beneficial formal financial products and services to all segments of a population.
According to Stats SA in 2013, more than 1.5 million people are running small, informal businesses in the country. These informal businesses do not easily satisfy the requirements of the formal financial sector. Banks require proper registration and paperwork in order to open business banking accounts and offer loans, limiting the use of such services by these businesses.
In South Africa, where 55.2 percent of youth are without a job, financial inclusion is one of the ways to tackle unemployment, through the provision of appropriate financial services to entrepreneurs. Digital transactions offer consumers, businesses and governments convenience, efficiency and security when accessing their funds.
In South Africa, financial inclusion for consumers has shifted from an access issue to a digital adoption and usage issue. However, many people withdraw money as soon as they receive it, using notes and coins for day to day transactions. A survey conducted with social grant recipients who receive funds digitally, found that 90% of fund recipients withdrew all funds from their bank account as soon as they became available. So where do the problems lie?