Abstract
Financial inclusion is a major contributing factor to economic growth globally. It is almost impossible to tackle financial inclusion without mentioning financial exclusion. In South Africa there are many people who are financially excluded, particularly from previously disadvantaged groups. In a country that is built on constitutional values such as equality, it is concerning that a huge portion of previously disadvantaged South Africans are still excluded from the financial system.
As a result this paper seeks to take a broader approach in analysing the problem of financial exclusion in South Africa. It aims to analyse the main contributing factors hindering financial inclusion in South Africa. These factors include: (a) lack of access to financial services; (b) financial illiteracy; (c) unemployment; (d) poverty; and, (e) the repercussions of the apartheid era.
It imperative to note that South Africa does not have specific legislation in place to promote financial inclusion, which is one of the contributing factors of financial exclusion. In light of the global COVID-19 pandemic, which has forced many countries, including South Africa, to digitalise many services, this study concludes that the enhancement of financial technology is the solution to combating financial exclusion in South Africa.
The study further finds that poverty, lack of access to financial services and the repercussions of the apartheid era are often linked to all the other factors that contribute to the hindrance of financial inclusion in South Africa. For the past 27 years, South Africa has attempted to include most individuals into the financial system without success. This failure negatively impacts the overall development of the country because those that are financially included advance while those that are financially excluded are hindered and are left behind.
The study further explores mobile money, online banking and payment systems, and branchless banking as ways to enhance financial inclusion. In conclusion this paper draws recommendations and insights from countries in the European Union that have successfully implemented financial inclusion methods.
Keywords: Financial inclusion; financial exclusion; Digital finance; financial services; financial technology, banking law.