Servicing the poor masses

Under the sweltering sun of the fairest Cape, clad in my shorts and flops, I mixed and mingled with taxi drivers in the 'hustle and bustle' of one of the busiest taxi ranks in Khayelitsha,apartheid's backwater on the outskirts of Cape Town.

From a shack restaurant nearby, I ordered u-Pens, tripe in Xhosa and uMngqushu, a mixture of dried beans and corns, divine stuff! As I tucked into my meal, a couple of guys joined me at the table. The mood was jovial except the sad news of the passing on of one of their peers.

Sharing the burdens

Listening to the sad state of affairs, I popped the question: Majita (gents), how do you plan to bury your mate? The answer was unanimous: "siyakoleka kubobonke onotaxi apha erenkini", loosely translated, we are collecting from all taxi drivers and their bosses at the taxi rank.

As the deceased is from the Eastern Cape, the costs will include the transportation of the body and two or three taxis will be donated to transport the delegation from the local taxi association, friends and relatives at no cost to them. On top of this, the family of the deceased will be presented with imali yamakhandlela (monies donated by friends and other members of the community to comfort the family of the deceased).

Community based insurance

Other types of community based and run insurance schemes are more organised, such as burial societies. Some of these societies are estimated to be worth a staggering R12 billion per annum. And contrary to how insurance companies operate, where a death certificate and other documents will guarantee the policyholder a cheque to bury the deceased, burial societies on the other hand, assist the family of the deceased with funeral arrangements and in ensuring that the family is comforted during this difficult time. The increase in the uptake of this type of insurance should therefore come as no surprise.

Ancient roots

This is an old practice going back to biblical times. About 3,500 years ago, Moses instructed the nation of Israel to contribute a portion of their produce periodically for "the alien resident and the fatherless boy and the widow." This was insurance in practice. Insurance offers protection against risks that already exist and is a way to share risk with others.

Community banks

In a way, this is the Ubuntu philosophy in practice which is widely practised on the African continent. In Nigeria for example, community banks – owned and manned by members of the community - were established in the early 1990s to fight poverty at grassroots levels and to create sustainable development.

Community banks are designed to meet the needs of a small scale entrepreneur, subsistence farmer and informal trader who largely dominate the informal sector. Although many challenges have been encountered with community banks, they have, in a few years of their existence, demonstrated the potential of being a veritable tool for empowering poorer communities by promoting a savings culture and healthy investment habits.

A new direction

Whilst discussions about a compulsory national savings and retirement scheme by government are laudable, these should however not attempt to thwart current community based savings initiatives. On the contrary, the government and the private sector should tap into these savings vehicles and seek to enhance them.

Ask anyone who grew up in the township, our fathers and uncles paid cash for their cars, furniture, lobola, and started businesses with the help of community-run savings schemes such as stokvels, mogodisano and many others. Loved ones have been buried with dignity for decades with the help of community run burial societies. In all these transactions, no complex fifty page documents are signed – simplicity is the name of the game.

The advent of democracy in 1994 is beginning to bear fruits. The proposal by National Treasury, albeit 14 years into our nascent democracy, to bring about a new legislative regime for small scale insurance players, different from that of the big insurance providers – is a step in the right direction. It's also a well-deserved recognition of the existence of the micro-insurance industry and its value-add to the lives of the poor.

Balancing development and protection

In brief, the discussion paper by National Treasury proposes that all micro-insurers fall under the supervision of the Financial Services Board (FSB). This is a welcome move indeed, considering the vulnerability of customers of in the low-income market segment where risks of potential abuse and mis-selling are rampant. The proposed legislation will seek to strike a good balance between market development and consumer protection.

This will go a long way to promoting access to financial products and services by South Africa's poor – a desperately needed catalyst to creating a savings culture and wealth. In fact, more work should go into studying these informal community-driven insurance vehicles for proper understanding and intervention by all parties concerned. Simply importing a foreign model because it has worked in the UK or South America is not good enough.

Ethical?

Ultimately, access to financial products and services should bring to bear an improved standard of living for the poor, not fat wallets for the shareholders. The taxi drivers of Khayelitsha do not have to collect monies from the community to bury their colleague – this is a sad indictment on the industry hell-bent on making a profit on every street corner of South Africa. How ethical is that?

The poor should be able to afford to bury their loved ones with dignity, financial security after losing a breadwinner. They must be afforded the means to send their children to school and institutions of higher learning. Finally, they must be able to retire with roofs over their heads, food on the table and proper healthcare.

Alternatives to the "big guys"

If the private sector cannot achieve these for the masses of poor South Africans, then there is nothing stopping the state from having its own banking institutions, insurance providers to compete directly with the private sector. Importantly, South Africa is a developing country, and the time has come to pull the carpet from under the private sector's carte blanche in the market.

Judging by the financial sector's dodgy record (lack of transparency, self-serving tendencies, high banking charges etc), alternatives must be created to give the "big guys" a run for their money.