An evaluation of the strategy of banking the unbanked for a leading South African bank.

Abstract

With the establishment of the Financial Sector Charter, all the major banks are now 'committed' to provide banking f a c i l i t i es to anyone within a ten-kilometer radius of their home. Specific deadlines have been set, in which these banks will face huge penalties, if they have not achieved the agreed proposals. The justification for this study is to have a look at the feasibility of this charter in meeting the goals proposed without having a detrimental effect on the long-term profitability of Standard Bank. Making banking affordable to the previously unbanked sector is paramount to the success of bringing more people back into the financial mainstream. Mention must be made that banks with poor business models, reckless management practices and poor corporate governance do go out of business in South Africa and elsewhere. During this study, an in-depth literature review was done to analyze the causes of strategic failures in the South African financial services sector, as well as analyzing the strategies proposed by other leading financial institutions within the local and international financial services industry and comparing this to Standard Bank's strategy. The research technique is essentially qualitative, but will involve the collection of quantitative and qualitative data through the use of a questionnaire. This dissertation investigates what the big four banks in South Africa (with emphasis on Standard Bank) have achieved regarding opening up access to their saving and lending facilities to the unbanked, taking cognizance of the trends locally and internationally, finally leading to a conclusion as to the most appropriate strategy for the future. An investigation will be conducted into whether this financial institution should employ a prescriptive or emergent strategy approach in order to successfully compete in this sector. The different lending strategies, namely linkage banking, downscaling, and dedicated banks are analyzed with reference to the international experience.