Deepening capital markets in South Africa

As part of danieldrezner.com’s keen interest in the spread of financial services to the developing world (click here for an earlier example of this interest), Laurie Goering has a story in today’s Chicago Tribune on the effort by South African banks to get South Africans comfortable with the idea of depositing their money in… banks:

In this nation where making a cash withdrawal at a teller’s window can cost you $4 in fees, it’s no surprise that more than 40 percent of adults have never opened a bank account. But South Africa’s banking fees, the highest in the world, are just one reason that 12 million South Africans don’t use banks. Unemployment is rampant, and many people struggle to save even the minimum balance necessary to open an account. Millions live in rural villages miles beyond the reach of the nearest bank. In a 2003 private survey, a third of South Africans said they agreed that “you can easily live your life without having a bank account.” South Africa’s government, and its banks, are trying to change that. Embarrassed that banking remains so inaccessible to black South Africans a decade after the end of apartheid and eager to tap into a vast market of potential customers, banks are launching a flurry of new promotions. First National Bank offers the “Million-a-Month” account that gives each depositor one chance at a monthly $250,000 cash prize drawing for each $16 they keep in the bank. Absa, another bank, offers cut-rate funeral insurance with its accounts, a huge draw in a nation where tens of thousands are dying of AIDS. Many banks now offer mobile automated teller machines, driven by truck into rural villages a couple of times a month, and Absa has come up with an entire 28-ton mobile bank, capable of being lifted by crane onto a truck and hauled wherever it is needed. Illiterate customers can open accounts and access money using only their fingerprints, recorded and checked via an electronic scanner. “When you start talking with people about banking, they always bring up the negative things, like the high charges,” said Innocentia Nkomo, an Absa branch manager in Dobsonville, a busy middle-class section of Soweto. “But once they see the benefits, they come flocking in.” At the heart of the effort to broaden the reach of banking is the new national Mzansi, or “southern,” account. Launched in October by all the nation’s major banks, it offers depositors a debit card and no-fee banking as long as transactions are limited to debit-card purchases, one deposit and a couple of ATM withdrawals per month. In the first four months, more than a half-million Mzansi accounts have been opened, a rate well beyond the expectations of most banking officials. “In 10 years’ time I don’t think there will be a person without a banking account in South Africa,” predicted Tshidi Madisakoane, a floor manager at the bustling Dobsonville Absa branch. “The community is showing so much interest in banking now. Things have changed.”

Read the whole thing. As someone who knows very little about the South African financial sector, I have two questions after reading this piece:

1) Why the hell are South African banking fees to high? 2) Why aren’t South African banks aggressively seeking to extend credit? That’s both their greatest potential source of revenue, and the best way to foster entrepreneurial growth in the country.