Appraisal of Financial Inclusion in South Africa: Proposing the Agent Banking Model Implemented in Malaysia

• Author: van Niekerk, M.G.
• DOI: https://doi.org/10.47348/SAMLJ/v33/i3a5
• Published date: 16 May 2022
• Date: 16 May 2022
• Citation: (2021) 33 SA Merc LJ 447
• Pages: 447-469

APPRAISAL OF FINANCIAL INCLUSION IN

SOUTH AFRICA: PROPOSING THE AGENT

BANKING MODEL IMPLEMENTED

IN MALAYSIA

MG VAN NIEKERK*

Senior Lecturer, University of Limpopo

Abstract

Financial inclusion is a burning issue around the world, especially in

emerging markets such as South Africa. Its importance lies in the fact

that it will effectively reduce inequality in this country in the long

term. This contribution traces formal financial inclusion measures in

South Africa. The transformation to financial inclusion after 1994

increased inclusion from 61 per cent in 2004 to 93 per cent in 2018.

The article highlights the fact that when people use bank accounts as

mailboxes (where all money is withdrawn as soon as it comes into the

account), some issues need to be addressed to ensure that they are

properly banked. Indications are that only 48 per cent of all adults in

South Africa can be considered to be properly banked. In South Africa,

financial inclusion was explicitly legislated for the first time by the

Financial Sector Regulation Act 9 of 2017. This article assesses the role

of agent banking — the provision of financial services through agents

or third-party intermediaries on behalf of financial institutions — in

increasing financial inclusion in Malaysia. The Malaysian agent

banking model could be beneficial to South Africa’s efforts to ensure

that more people have access to a bank account that they can use

regularly.

Keywords: banked; agent banking; financial regulation; Amended Finan-

cial Sector Code 2017; Financial Sector Regulation Act 9 of 2017

*BComm LLB LLD (University of Pretoria).

447 https://doi.org/10.47348/SAMLJ/v33/i3a5

(2021) 33 SA Merc LJ 447

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IINTRODUCTION

Financial inclusion has become a burning issue in the new global

economy,

1

especially for people in emerging markets.

2

Financial inclu-

sion is a major challenge in poorer communities as it affects almost

19 million people living in the rural areas of South Africa.

3

At the G-20 Summit in Seoul, 2010, South Africa, as a member of the

G-20 nations, reiterated to the other leaders its strong commitment to

f‌inancial inclusion, recognising the benef‌its of improved access to

f‌inance for uplifting the lives of the poor.

4

By 2013, some 50 countries

had pledged their commitment to f‌inancial inclusion by setting targets

to attain this goal. In 2014, the world’s largest development bank, the

International Bank for Reconstruction and Development, together with

the World Bank, conf‌irmed their commitment to a world where all

people can make use of f‌inancial services so that they can benef‌it from

opportunities that may arise.

5

It is widely accepted that f‌inancial

inclusion can help to reduce poverty, increase economic growth, and

support sustainable and inclusive development.

6

According to the National Development Plan 2030, it is not easy for

South African banks, although highly developed, to extend banking

services to the poor who live in rural areas. This is primarily due to the

high costs of providing these services, combined with the lower level of

income for this category of people.

7

The real economic growth rate in South Africa for the previous years

1

Louis & Chartier, ‘Financial inclusion in South Africa: An integrated framework for

f‌inancial inclusion of vulnerable communities in South Africa’s regulatory system reform’

(2017) 1(1) Journal of Comparative Urban Law and Policy 170 at 170.

2

Examples of emerging markets in the world are Brazil, Chile, China, Colombia,

Hungary, Indonesia, India, Malaysia, Mexico, Peru, Philippines, Russia, South Africa,

Thailand and Turkey.

3

Statista, ‘South Africa: Urbanization from 2007 to 2017’ available at https://

www.statista.com/statistics/455931/urbanization-in-south-africa/, accessed on 7 June 2019.

4

G-20 Seoul Summit, 11–12 November 2010 ‘The G-20 Seoul Summit Leaders’ Declara-

tion’ available at http://www.g20.utoronto.ca/2010/g20seoul.html, accessed on 11 March

2018.

5

International Bank for Reconstruction and Development (IBRD)/World Bank, ‘Finan-

cial inclusion’ available at http://siteresources.worldbank.org/EXTGLOBALFINREPORT/

Resources/8816096–1361888425203/9062080–1364927957721/GFDR-2014_Complete_

Report.pdf, accessed on 14 June 2019; Nhavira, ‘Whither f‌inancial inclusion: A holistic

approach’ (2015) 5(1) Journal of Strategic Studies 79 at 85.

6

Zins & Weill, ‘The determinants of f‌inancial inclusion in Africa’ 2016 Review of

Development Finance 46 at 56; IBRD/World Bank, ‘Financial inclusion’; Rakoto, ‘The

promotion of f‌inancial inclusion in Madagascar through mobile money and microf‌inance’

available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3173606, accessed on

9 June 2019.

7

National Planning Commission, National Development Plan 2030 – Our Future – Make It

Work 150.

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