Shared Interest News

The 70 year old former mineworker in Welkom slowly swiped his new plastic card through the small portable banking machine. As it showed his transaction had been completed, he grinned. “Free at last,” he said. “Free at last.”

For impoverished communities like his that depend on mining, banking has remained beyond reach. Despite some rapidly growing national financial programs to serve the rural and township poor, nearly half of all South Africans still have no access to bank services. As they confront infrastructure hurdles and high establishment expenses, some banks are exploring lower cost mechanisms to reach the market of 17 million unserved potential clients.

Shared Interest’s most recent guarantee represents a breakthrough in banking. It is designed to enable 360,000 impoverished South Africans to open bank accounts in their communities for the first time — electronically. The R5,400,000 facility will partially guarantee R12 million in credit extended by Teba Bank to launch “portable banks.” Upon completion of this pilot project, Teba plans to roll it out to thousands more low-income South Africans.

[NOTE: US$1 = R6.4 on September 21, 2005]

Shared Interest’s partner, the Thembani International Guarantee Fund, has structured this guarantee with Teba, which has operated in South African mining communities for more than a century. The National Union of Mineworkers is one of its major shareholders. Three years ago, Teba sought a cost-effective way to expand further beyond the mining areas. First the bank provided a debit card for its customers. Then, it developed the systems and software to deliver services to previously “unbankable” communities without the bricks and mortar.

The new technology is a “Point of Service” (POS) machine resembling a credit-card processing device and weighing less than two pounds. Operating on batteries and satellite cell technology, it is activated by a card similar to a debit card and programmed with a PIN number. Transactions include basic ATM services in addition to bill payments and Visa/MasterCard accreditation.

BFS clients learn to use portable banking machines.

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The system is people-intensive. Teba will extend credit for two franchisees to purchase 4,000 POS devices over a three-year period and lease them for R350 a month to nearby community merchants. These may be small spaza shop-keepers or other retailers whose own businesses would benefit from financial products. They will be approved to offer specific services tailored to their goals, capacities and customers. With each transaction, they will earn a small profit, to be shared with Teba. The bank will assist franchisees in maintaining or if necessary replacing the devices, providing electronic trouble-shooting, weekly telephonic upgrades, a call center and back-up machines.      

Teba has tested its system with Beehive Financial Services (BFS), another Shared Interest guarantee beneficiary, which extends credit through groups of women who save and borrow together. BFS has found the cards to be practical and popular among its clients, who can use them to purchase goods from suppliers without the dangers of carrying cash.

Teba is eager to broaden its client base. “After six months, Teba can establish a credit history for a client to use when that client comes to Teba for a loan,” points out consultant Veon Cupido. The bank is running a race against time. Soon competing banks will try to imitate the technology. By then, many new customers will be established as “bankable.” And that, for Shared Interest and Thembani, is the point.