Making financial markets work for the poor
Remittances from South Africa to SADC
Geoff Orpen26 March 2015
About FinMark Trust and its focus areas
• Independent trust formed in April 2002• Initial and core funding from the UKAid• Mission: “Making Financial Markets Work for the Poor”• Aim: Facilitating and catalysing development around access to financial services• How: move beyond data production, with an increased focus on being a catalyst to
systemic change in financial inclusion by providing support to transformation at a country level
Savings
Credit SMME access
Cross cutting themes:
Focus areas
Information and Research Support
Consumer Financial Empowerment
Financial Policy and Regulation
Housing Finance
Micro-insurance
Regional Financial Integration
Retail payments systems
Rural / agricultural finance
2
Remittances: An Overview
Remittances are defined as •non-reciprocal transfers •from one person to another •across a distance (generally cross-border) •of relatively low value •usually cash to cash
Outcomes of recent Surveys on Remittances:•migrants send money home to service their family’s basis needs, to pay for school fees, rent or transport, or to meet unexpected costs •80% of migrants send cash remittances at least once every three months (frequency depends largely on the remitters’ capacity to save enough money) •average amounts sent home by migrants to be between R500 and R1,000 for each send •only 2% of remittances are sent through official banking channels, almost 70% are sent via buses or taxi drivers, 20% are sent back with visiting family or friends and about 8% through other channels
Estimated size of the migrant population
Country of originRight to enter – Right to stay &
work
No right to enter – Right to stay and
workNo right to work
Total SADC immigrants
A B C D=A+B+C
Angola 61 6 125 4 016 10 202
Botswana 7 017 - 45 515 52 533
Dem. Rep. of Congo
797 28 309 52 293 81 399
Lesotho 79 132 - 317 938 397 070
Madagascar - - - -
Malawi 1 077 - 70 616 71 693
Mauritius 563 - 36 898 37 460
Mozambique 81 692 160 000 245 147 486 839
Namibia 163 - 21 419 21 582
Seychelles - - - -
Swaziland 14 473 - 103 079 117 552
Tanzania 79 - 5 187 5 267
Zambia 972 - 63 755 64 727
Zimbabwe 12 597 646 484 1 250 000 1 909 081
Total 198 624 840 918 2 215 863 3 255 406
Source: DNA calculations, drawing on various sources
Estimated remittances from South Africa into SADC (Rm)
Country of origin
Migrant population estimate
% remitting estimate
Total remittances -
high end estimate
R million
Total remittances -
low end estimate
R million
Total remittances –
mid- point estimate
R million
Angola 10 202 40.0% 29.2 20.2 24.7
Botswana 52 533 55.0% 216.0 149.5 182.7
Dem. Rep. of Congo
81 399 35.0% 148.1 102.6 125.4
Lesotho 397 070 55.0% 1 994.5 1 514.0 1 754.3
Madagascar - 35.0% - - -
Malawi 71 693 35.0% 146.8 101.6 124.2
Mauritius 37 460 35.0% 98.0 67.8 82.9
Mozambique 486 839 55.0% 1 781.8 1 395.4 1 588.6
Namibia 21 582 40.0% 61.7 42.7 52.2
Seychelles - 35.0% - - -
Swaziland 117 552 55.0% 462.3 320.0 391.2
Tanzania 5 267 35.0% 12.0 8.3 10.1
Zambia 64 727 35.0% 147.3 101.9 124.6
Zimbabwe 1 909 081 75.0% 7 910.8 5 476.7 6 693.7
Total 3 255 406 13 008.4 9 300.9 11 154.6
Remittances per country
Angola0%
Botswana2%
Dem. Rep. of Congo1%
Lesotho18%
Madagascar0%Malawi
2%
Mauritius1%
Mozambique11%
Namibia1%
Seychelles0%
Swaziland4%
Tanzania0%
Zambia2%
Zimbabwe58%
Remittances between RSA and country as a % of the total of R7,56 billion informal remittances
Shoprite Money Transfers The South Africa Case Study
The South African Market (2012) • 13 million adults make up the unbanked market segment • R19 billion is the estimated value of cash-to-cash person-to-
person money transfers uncaptured by the formal sector (Retailers, Taxis/buses/personal delivery, etc.)
• Only 10% (R1.9 billion) is captured by the formal sector (Banks & Post Office)
Shoprite Domestic Money Transfers • Shoprite, in association with eCentric and Capitec Bank,
launched the domestic in store remittances service in 2006 • By 2010, they manage to capture an estimated R10 billion of the
market • Annual volume growth rates are exceeding 25%, despite growing
competition • Service used by more than 10 million individuals
Lesotho remittances-the impact
• Population is 2 million• 50% of the population have incomes below poverty
line• 400 000 migrants from Lesotho living in SA• Total remittances from SA to Lesotho is R1.75bn• R1.4bn of the total remittances is remitted informally• Using formal channels the cost to remit money is
16.43% of the value remitted• If all remittances were formalised the cost would
amount to R287 million• New remittance corridor cost is R9.99 per transaction
up to a max of R5000 per transaction
Shoprite - Money Markets
“Money Market” service stations offer a comprehensive range of financial services and products to the Group’s customers through dedicated in-store service counters: •utility bill payments •bus and airline tickets •basic insurance policies •tickets for major sporting and cultural events •travel packages •MONEY TRANSFERS
Shoprite estimates more than 50% of its clients make use of the counter while in the store
Installed 642 new service points to meet demand
The Shoprite Money Transfers Model FUNCTION CHARACTERISTICS
Primary Service Point and Access Method
Money Market Kiosks Shoprite, Checkers and Usave Stores Cash over the Counter
Lowest Compliance Requirement
No bank account required by either sender or recipient
Verify and hold copy of customer ID Pricing Structure Sender pays flat fee of R9.99 per transfer Model Retailer led model with sponsoring bank providing
regulatory cover and carrying risk
Revenue Opportunity Bank holds trust account and earns interest on float
Share in portion of customer fee
Live Domestic Service Countries
South Africa (April 2006) with Capitec Bank Zambia (Nov 2013) , Namibia (2014)
CMA Pilot cross-border Lesotho (March 2015) with Capitec Bank (FinMark Trust)
Domestic and Cross-border under application
Swaziland, with Standard Bank and FinMark Trust
Potential Angola, Nigeria, Botswana, Ghana, Malawi, Mozambique, Nigeria, Tanzania, Uganda, Zimbabwe with Standard Bank
Key areas addressed in the remittances project
Component Problems Addressed Solution
Affordability High fees (on average the cost is 20-25% of the value sent
Shoprite solution is R9.99
Ease of use Large number of forms to be filled in
Easy to use (5 simple steps)
Awareness and trust
Many people use informal channels because that is all they have known
Shoprite has 20 million customers hence people know and trust the brand
Compliance requirements
People in low income areas cannot generally supply documents required for FICA (no title deed, lack of bills reflecting address)
Due to relatively low values remitted, FICA documentation not required (only need an ID)
Competition Current players monopolise the remittance space hence can almost charge what they want to.
Market is now more competitive and diversified
Financial Inclusion
Financial sector excludes the poor to a large degree
Migrant families are introduced to financial services
Key issues to be addressed
• In-country remittances scheduled for piloting in Swaziland (during 2015) Currently operational in Zambia ,RSA, Namibia and Lesotho
• Cross Border remittances currently operational in Lesotho (March 2015)
• Landscape of remittances is changing as a result of the new product (e.g. people depositing money before they get on a taxi to travel home at the end of a week’s work)
• Need to motivate for increased lenience with respect to Exemption 17
• Cross Border remittance is currently limited to a remittance between RSA and another country (1 direction)-needs to allow for remittances between all countries in the region