Bridging financial inclusion in SA’s informal sector

Informal sector: Andy Jury is the CEO of Mukuru. Photo: Supplied
Andy Jury is the CEO of Mukuru. Photo: Supplied

The South African informal sector is a vibrant thread, pulsating with entrepreneurial energy. Valued at almost $10 billion annually and representing 17% of the country’s total employment, the informal economy is an indispensable cog in the economic machine.


Moreover, given that South Africa’s unemployment rate is sitting at 32.9%, the highest in the world, the country’s informal economy will continue to grow exponentially. And yet, it remains largely disconnected from formal financial systems.


As South Africa looks toward embracing the Fourth Industrial Revolution, now is the time to build a digital bridge to financial inclusion, designed with trust at its core.


The FinMark Trust Annual Report 2022 brought to light several pressing issues South Africans face, including the ongoing energy crisis, subdued job creation, and an economy under strain. It emphasised the need to prioritise projects that address these challenges while advancing financial inclusion, particularly for the economically vulnerable.


The invisible majority


With the informal sector constituting such a significant percentage of the country’s economy, its exclusion from the formal financial ecosystem is detrimental on a number of levels.


For one, by depriving the more than 50% of South Africa’s urban population who live in townships and informal communities from financial access, the economy is losing the potential to harness the power of the sector to drive growth and financial stability.


Barriers to banking, as identified by the FinMark Trust, include the cost of acquiring Point of Sale (POS) devices, bank fees for digital transactions, and the necessity for businesses to close while merchants visit banks. Furthermore, unregistered businesses struggle to get a bank account.


Addressing the gap


The digital revolution presents fintech players with an unprecedented opportunity to address this gap. By leveraging digital technologies, companies like Mukuru are designing financial services that cater to the unique needs and contexts of the informal sector. However, in this journey of digital financial inclusion, one factor stands out as a cornerstone: Trust.


Trust is the lifeblood of any financial relationship, and even more so in the informal sector. Relationships hinge on in-person engagements and handshakes. This makes establishing trust through digital platforms a difficult undertaking.


It requires savvy fintechs to focus on elements such as convenience, transparency, reliability, and safety. It also relies heavily on social influencers, such as the head of one’s church, and people with a shared language. 

In a sector characterised by people who have limited time to travel far distances to branches, services that offer easy access through both analogue and digital channels are critical. From USSD and WhatsApp to customer apps, providing multiple entry points caters to the diversity of the informal sector, showing an understanding of their unique needs and circumstances.


Adding to the value chain


Hidden fees and costs erode trust and discourage engagement with formal financial services. Digital platforms that make all costs visible and easily understandable foster trust by ensuring customers know exactly what they are paying for.


The ability to deliver on promises consistently is pivotal in establishing confidence. Whether it is order delivery, cash collection or digital distribution, the assurance that services will function as promised and when needed is crucial in maintaining trust.


Safety is the bedrock of trust. At a time when cybercrime is pervasive, providing secure platforms is non-negotiable. Tried and tested processes and tools that protect customers’ funds and personal information go a long way in assuring customers that their money is safe.

Listening to the customer

Engaging in a consistent feedback loop with customers is also crucial to building trust. By actively seeking customer feedback and incorporating it into service design and delivery, digital financial services show that they value and respect their customers. This feedback loop, combined with dedicated customer service, fosters trust by showing customers that their voices are heard, and their concerns addressed.


Above all else, the human touch remains a critical building block for creating trust in the digital world, especially in the informal sector.


This is why Mukuru has an extensive network of field employees to establish trust and drive retention. These employees bring a sense of comfort to people as they can establish rapport when signing up with a fintech service provider.


Moreover, overcoming the “cash conundrum” is key. Integrating user-friendly digital payment systems that are widely accepted throughout informal communities while providing accessible cash withdrawal points will be essential. Ultimately, establishing an environment of trust will be the key to creating a pan-African digital financial system that is inclusive, resilient, and robust.

  • Andy Jury is the chief executive of Mukuru.

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