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South African banks and the unbanked: Progress and prospects


  • Andrie Schoombee

    () (Department of Economics, Stellenbosch University)


Consideration is given to what the big four South African banks have done since the late nineties to open up their lending facilities to the unbanked, taking cognisance of the trends internationally, finally leading to a conclusion as to the most appropriate strategy for the future. The banks' focus has been on lending to low-income salaried individuals, making use of the downscaling strategy. Inappropriate credit technologies in this very competitive market segment led to a serious setback in 2002 when two bank micro-lenders had to terminate their operations. In contrast to their enthusiasm for the low-income market, the banks have shown a lack of interest to engage micro-entrepreneur lending, but this is to an extent vindicated by the international experience. Establishing banks dedicated to micro-finance by means of specialised public/private sector partnerships emerges as the most appropriate strategy to engage with micro-entrepreneurs. The big four banks' focus in micro-lending is expected to remain on consumption related loans for low-income salaried individuals.

Suggested Citation

  • Andrie Schoombee, 2004. "South African banks and the unbanked: Progress and prospects," Working Papers 02/2004, Stellenbosch University, Department of Economics.
  • Handle: RePEc:sza:wpaper:wpapers10

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    References listed on IDEAS

    1. A. Schoombee, 1998. "Commercial Banking Services for Micro-Entrepreneurs in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 66(3), pages 164-175, September.
    2. A Schoombee, 1999. "Linkage Banking for Micro-Enterprises in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 67(3), pages 187-200, September.
    3. Morne Nigrini & Andrie Schoombee, 2002. "Credit guarantee schemes as an instrument to promote access to finance for small and medium enterprises: An analysis of Khula Enterprise Finance Ltd's individual credit guarantee scheme," Development Southern Africa, Taylor & Francis Journals, vol. 19(5), pages 735-750.
    4. M Nigrini, 2002. "Empowering Poor Rural Villages in South Africa:A Preliminary Investigation into Financial Service Cooperatives," South African Journal of Economics, Economic Society of South Africa, vol. 70(2), pages 172-180, March.
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    Cited by:

    1. JJ. Cao-Alvira & LG Deidda, 2013. "Financial liberalization and the development of microcredit," Working Paper CRENoS 201324, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

    More about this item


    banking; credit; South Africa;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation


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