Cape Town: The percentage of South Africans with a bank account increased from 47% in 2005 to 63% in 2011 after the launch of the first Financial Sector Charter in 2004, said Minister of Finance Pravin Gordhan.
Addressing more than 350 delegates from over 70 countries at the opening ceremony of the 4th Global Policy Forum in the city on Wednesday, Gordhan said South Africa’s experience of the Financial Sector Charter provided a lesson on how to confront challenges of financial inclusion.
The first charter was negotiated in 2004 and resulted in the Mzantsi bank account which has been taken up by three million users, while banks also began rolling out more bank branches, he said.
The second Financial Sector Charter was in March gazetted by the Department of Trade and Industry for comment. Gordhan said the long-term sustainability of financial systems hinged on the ability of these systems to serve all citizens.
“The inequality, the social and political distrust of elites and the neglect of the poor and the impoverishment of millions as a result of the financial crisis, that we still haven’t recovered from, poses serious challenges to the economic, political and social stability and progress of ourselves,” he said.
He said the National Treasury was developing a twin peaks regulatory framework for financial services which would come into effect in the next 18 months.
The new model would see the development of different regulatory focuses between prudential regulation and consumer protection, while the National Treasury would remain responsible for policy implementation, including one of encouraging greater financial access.
He said an IMF report in April on financial stability was concerning, as it indicated that innovative products are already being developed to side step new financial regulations. The financial sector is faced with various challenges, include a disconnect from the real economy, said Gordhan, who pointed out that banks needed to serve more people and entrepreneurs to generate growth and create jobs.
Another challenge is how multi-national banks are serving emerging markets, he said. It is also important to develop regulations to ensure that the poor are protected should new crises emerge.
Central banks also needed to ensure that their respective banking sectors aren’t overly dominated by a few big banks – as this could stifle competition and the development of new and affordable financial products.
Deputy governor of the central bank of Philippines Nestor Espenilla said the central bank’s policy of focusing of micro finance had led to 200 community banks providing financial services to almost a million micro entrepreneurs
Espenilla said along with increasing micro finance, the government had also encouraged more financial education and consumer protection. Also addressing delegates, Alliance for Financial Inclusion (AFI) executive director Alfred Hannig paid tribute to one of the founding members of AFI, Mexican Raul Hernandez-Coss, who passed away in Colombia recently. Hernandez-Coss was instrumental in developing a unitary measurement for financial inclusion.