Dominated by a handful of major banks, South Africa’s advanced financial system allows any foreign visitor with a debit card instant access to cash at ATMs everywhere. Unfortunately, this first-class banking system is mostly inaccessible to millions of South Africans who live in deep poverty in squatter camps or informal settlements around the country. Officially, national unemployment hovers around 25 per cent, but actual figures are estimated to be much higher. Surprisingly, even teachers, nurses, and other civil servants with full-time jobs barely qualify for basic banking services. For example, teachers at state-run schools may earn the equivalent of about $1,000 a month while a janitor in the public sector struggles to survive on less than half this salary, The Star in Johannesburg reported recently as civic servants walked off the job in country-wide strikes to demand better pay. Meantime, major banks such as ABSA and First National Bank expect a customer to earn the equivalent of about $10,000 to $20,000 in gross annual income before offering basic services such as a chequing account. The dilemma: How to cash a pay cheque or government allowances if you are one of South Africa’s “unbankable” citizens? Many cash their cheques at grocery stores, obtain payroll cash loans at double-digit interest rates or depend on friends to access financial services. This informal sector, dominated by loan sharks and mostly unregulated, is widely referred to as “microfinance.”Although the South African government has now taken steps to regulate this informal financial sector, “microfinance” has a history of failure and has gained a bad reputation in the country. “The commercial banks are strong here, but they are not reaching around 13 million poor South Africans,” says Patrick Mabuela of Oikocredit in Johannesburg. Oikocredit is a worldwide organization that has pioneered microfinance for over 30 years. Notwithstanding its unique context, Oikocredit is providing capital to local microfinance institutions that wish to improve the lives of the poor. Providing credit is now recognized as a powerful tool for eradicating poverty.
“Pray for peace and harmony in South Africa,” urges Mr. Mabuela, a life-long Anglican who believes in helping those who cannot help themselves because they do not have access to financial services. Nandy Heule is a freelance writer and an Oikocredit volunteer. She can be reached at firstname.lastname@example.org.