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Adoption and non-adoption of mainstream formal banking systems amongst low income earners in the South Africa, Zambia and Zimbabwe

International Journal of Finance & Banking Studies

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Title Adoption and non-adoption of mainstream formal banking systems amongst low income earners in the South Africa, Zambia and Zimbabwe
 
Creator Mafukata, Mavhungu Abel; Centre for Development Support
University of the Free State
Republic of South Africa
 
Subject Banking
Unemployment; micro-finance; Non-banking; non-saving; small income earners; social capital
 
Description The majority of income earners of small-scale informal economic sectors in most developing regions of the world do not bank their earnings with mainstream formal banking institutions preferring to “bank” their income at their homes or not to bank at all. In addition, there is perception amongst mainstream formal banking institutions that low income earners were “unbankable” and therefore bad business. However, there is emerging literature opining that to the contrary, low income earners would provide a profitable niche market for mainstream formal banking institutions in the developing regions. In the Southern African Development Community (SADC), trends with regard adoption and non-adoption of mainstream formal banking systems amongst small income groups were mixed. This paper investigates adoption and non-adoption patterns of mainstream formal banking systems amongst small income earners in South Africa, Zambia and Zimbabwe. The results revealed that the informal cross-border traders who trade between Zambia and South Africa were good adopters of mainstream formal banking because the majority of them in these countries had already adopted mainstream formal banking through savings while only a few was left out of the system. However, there was a sharp contrast in Zambia where small income earners from the micro-finance adopting households were poorly banked with a huge majority which has been left out of the system. In Nyanga, Zimbabwe, of the respondents, only a few had adopted mainstream formal banking against the larger majority of non-adopters. The small income earners of the small-scale informal communal cattle farmers sub-sector in South Africa had 47.2% of its population adopting mainstream formal banking through savings whereas the majority 52.8% was left out. This paper concludes that adoption or non-adoption of mainstream formal banking systems patterns vary from region to region, and sector to sector even where income earners were almost equals in terms of household income earnings. However, leaving out from the mainstream formal banking systems a critical sector of the economy which contributes approximately more than half of the total public employment and means of household earnings could be impeding to government efforts in the respective countries to integrate low income earners into mainstream formal banking.  
 
Publisher SSBFNET
 
Contributor N/A
 
Date 2015-03-01
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/392
 
Source International Journal of Finance & Banking Studies (ISSN: 2147- 4486); Vol 4, No 1 (2015): JANUARY; 37-50
2147-4486
 
Language eng
 
Relation http://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/392/281