1. The “All Africa” scene Presentation to the all Africa credit congress By Prega Ramsamy CEO FinMark Trust 16-17 May 2016

2. Building momentum towards greater financial inclusion 2002-2005 2005-2010 2010-2015 2015- onwards Identification of key obstacles for financial services to reach the low income population in South Africa Support pro-access policy change and commercial innovation within and outside South Africa Focus on regional financial integration within SADC Make financial inclusion happen in SADC and beyond

3. A holistic approach to financial inclusion We put the poor (as defined by MDG) at the centre of every strategy, particularly vulnerable groups such as women and youth We plan nationally on the basis of financial inclusion diagnostics We operate regionally to make financial markets accessible, sustainable & inclusive We impact globally by influencing global setting bodies We plan nationally Conduct financial inclusion diagnostics, developing country roadmaps and implementation activities Provide data and analysis that enables policy makers and financial service providers to better understand the financial needs Support national governments through stakeholder driven financial inclusion programmes Regional initiatives, methodologies, information and expertise developed in the process are applicable globally. Influence the global standard setting bodies.

4. FinMark Regional and Global Footprint

5. What have we learnt from more than a decade of experience on making financial markets work for the poor.

6. Financial inclusion (Consumer Access Strand)

7. Financial inclusion (Small Business Access Strand)

8. The SADC Access Strand 34% (41.9 million) adults population in the region are financially excluded adults, i.e., they do not use any financial products – neither formal nor informal. 12% (14.4 million) adults rely ONLY on informal mechanism but NO formal products/services 18% (22.7 million) adults have/use formal non-bank products/services but NO commercial bank accounts – they might also have/use informal mechanism 36% (45.7 million) adults have commercial bank products/services – they might also have/use other formal and/or informal mechanisms

9. Other strands – Savings & Credit 21,4 million (17%) adults population in the region have/use a saving product from a formal financial institution 60.9 million adults in the region do not save in any way About 1 in 6 (18.5million) adults have credit from a bank or other formal credit institution 68% adults do not borrow or do not have access to credit and loan products/services

10. We have a growing “cusp” group with uncertain futures $2 - $5 per day per capita Cusp group in Africa Actively Earning Straddling Formal & informal ++

11. Create upward convection or churn Credit & growth literature: Cars, homes, etc Collateralized assets No Collateralized assets

12. Meet Natalie the survivor 41 years old, Female Ga-Mashashane, Part-time cleaner Living with her family Single mother/grandmother Often living with small incomes and SASSA social grants, survivors struggle with their finances on a daily basis. A lack of transparency into financial products and the pressure to make ends meet forces many of them into repeated cycles of debt. She currently has 3 loans from 3 institutions – for R14,000, R7,000, and R5,000. She is also borrowing R400 from a loan shark at 40% interest. She will borrow R300 from her friend too regularly, with no interest.

13. Tracking income and expenditure Monthly Personal Income R3,000 self-made and grants Monthly Expenses R3,500 Monthly Spend Nokia feature phone Television Stereo Microwave Refrigerator Key Assets

14. Access to credit – Swaziland Adult population Average amount per person

15. Size and scope of the MSME sector Example: FinScope MSME Survey in Zimbabwe 2012 2,8 million MSME owners Employing 2,9 million people (excluding MSME owners) Owning 3,5 million MSMEs Estimated turnover (2012) US$ 7,4 billion (65% of MSME owners reported on turnover) 5,7 million people 2 million individual entrepreneurs 800 000 business owners with employees 29 % Important contribution to employment 71% 29%

16. Financial inclusion among MSME owners Example: FinScope MSME Survey in Zimbabwe 2012 Total business owner population 100% (2,8 million) Financially included 57% (1,6 million) Financially excluded 43% ( 1,2 million) Formally served 18% (504 000) Informally served 50% (1,4 million) Driven by informal savings Banked 14% (392 000 ) Driven by cash transactions and savings Served by other formal financial institutions 7% (196 000) Driven by insurance

17. 2015 market landscape self-made and grants people are unemployed (26%) 9,825,644 11.1Million people coming from household supported via social grants

18. Households are under more financial pressure Increased pressure as households have fewer income earners Less Earners Fewer people being aided financially by friends and family Less Aid

19. Quality of financial inclusion Quality of financial inclusion is based on the range of products held to create the ability to save, insure, borrow and transact Have a more diversified product repertoire but it is not optimised yet Have a balanced portfolio of products that are suited specifically to their financial wants and needs Have a non-optimised portfolio of financial products Moderately served Adequately served Thinly served Optimised Non-optimised 16,332,149 people 50% 9,091,455 people 28% 7,045,878 people 22%

20. While financial inclusion is static While financial inclusion is static, we do see a softening of informal product usage and an increase in formally served 32.5m adults are financially included in 2015 versus 31.4m last year A higher proportion of LSMs 1-2 are excluded, but exclusion decreased across LSM 3-6 and LSM 9-10 2015 2014

21. Comparing Overall Access Strand and Quality of Financial Inclusion measure (Q-FIM)

22. More people are tapping into credit mostly via formal products Credit 2015 2014

23. Unsecured loans are the driving force behind the increase in credit access People who have taken an unsecured loan have done so for short-term, essential needs such as: Food 26% Emergency 26% Transport fees 12% Bills 10% Clothes 10% Who is taking an unsecured loan? 63% LSM 5-8 53% earn R1 - R7,999 41% aged 30-44 years 43% matric

24. Growth of the consumer credit market based on debtors book Credit type2007Q42015Q4% Type Mortgage 657 592 024 769 855 771 030 97430,14% Secured Credit 200 704 159 632 369 573 183 70984,14% Credit Facility 125 958 624 861 215 979 517 93071,47% Un-Secured 40 947 493 050 164 686 255 101302,19% Developmental 33 567 090 224 Short Term 682 143 501 3 637 649 438433,27% Grand Total 1 025 884 445 8131 643 214 727 376 60,18% Unsecured credit grew by 302 % from R40bn in 2007 to R164bn in 2015

25. Increasingly, people are struggling to stretch their money

26. South African Credit and Risk Industry Source: NCR CBM,CCMR SA Population of Working Age 2008 2015 31 540 000 35 800 000 2015 Up 13% Outstanding Debtors Book as per CCMR 2008 2015 R1 130 000 000 R1 643 000 000 2015 Up 45% 2008 2015 3,47 3,51 2015 Up 1 % Average Accounts per Consumer 2008 2015 55,68% 66,31% 2015 Up 19% Credit active consumers % of working pop

27. South African Credit and Risk Industry Source: NCR CBM,CCMR Credit Active Consumers as per CBM 2008 2015 17 560 000 23 740 000 2015 Up 35% Consumer Accounts as per CBM 2008 2015 60 950 000 83 550 000 2015 Up 37% 2008 2015 422 480 000 1 542 600 000 2015 Up 265 % Total Enquiries done at the credit bureaus 2008 2015 24,06 64,98 2015 Up 170% Average Number of enquiries per Consumer

28. Potential Growth of Credit information Records Total population Adult population Current Records on C/Bureau % records per Adult Projected records Botswana 2 100 0001 071 000 160 00014.9% 357 000 Lesotho 1 900 000913 900 120 00013.1% 304 633 Namibia 2 100 0001 029 000 160 00015.5% 343 000 Swaziland 1 100 000524 700 68 00013.0% 174 900 Zambia 14 600 0005 796 200 780 00013.5%1 932 067 Zimbabwe 13 100 0005 737 800 1 400 00024.4% 1 912 600 Total 34 900 00015 072 600 2 688 00017.8% 5 024 200 Lesotho went from sharing 0% records in 2015 to 120 000 records in 2016

29. Measurement scale of consumer financial vulnerability There is a real risk that consumers may become very exposed during 2016 “ “ Source: MMI Holdings

30. Consumers’ financial vulnerability levels since 2009 Source: MMI Holdings

31. Thank you