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A view on how the co-operative business model advances financial inclusion in South Africa

18 May 2018Johan Nel, Iemas
Johan Nel, CEO at Iemas Financial Services.

Johan Nel, CEO at Iemas Financial Services.

The term financial inclusion refers to much more than merely having a bank account. To be financially included, an individual must have access to products and services that enable them to actively save, borrow, obtain insurance or use payment services in a responsible and sustainable manner.

South Africa in general has a high level of financial exclusion in that only a quarter of low-income households actively use their bank accounts and one third of the population withdraws the total balance from their account once available (e.g. weekly wages). This phenomenon is attributable to various reasons, including a distrust of financial institutions, expensive banking fees and limited access to everyday banking facilities available. This is according to The determinants of financial inclusion in Africa. Review of Development Finance, Vol 6 by Zinz, A & Weill, L. (2016).

“Achieving broader financial inclusion is an item on the agendas of a number of regulators and financial services and credit providers. It can be achieved, inter alia, by: a) saving b) supplementing of income and c) investing in further education to ensure job security and career growth” says Johan Nel, CEO at Iemas Financial Services (Co-op) Ltd. However, one needs to have access to various financial products in order to save, start a business and study further. “Although there are many products available in the market, it is important to weigh up the different options and ensure that you understand what the interest and re-payment terms are. At Iemas we offer various competitive products such as loan products to pay for education, personal expenses and to acquire a motor vehicle as well as savings plans and numerous insurance products” continues Nel.

Financial institutions should promote financial inclusion and create opportunities for the general public to have access to comprehensive and affordable financial products. The financial services co-operative business model is specifically designed to make financial products accessible and to operate to the benefit of its members.

Iemas Financial Services operates as a co-operative. In essence, it is a member-owned organisation where people, and not profit, is at the heart of its business. Profits are shared among members in relation to the business each member conducted with the co-operative during a specific financial year. Over the past ten years Iemas allocated over R1 billion to members, with R109 million in 2017 alone.

Iemas’ unique business model further fosters financial inclusion in that the co-operative has contractual agreements with more than 600 employers in South Africa. These employers include a large number of higher education institutions, Mediclinic, Media24, Sanlam and AVBOB - to only mention a few whereby Iemas brings its comprehensive financial products and services portfolio to the employees through worksite marketing and other initiatives agreed with the employers. Iemas’ distribution channels, consisting of 30 branches nationwide, service points at employers, a centralised contact centre and various digital communication platforms further promotes accessibility and the opportunity to be financially included.

In line with co-operative principles, Iemas further believes that financial education plays a pivotal role in cultivating a culture of financial inclusion as it enables members to make sound financial decisions and to ultimately achieve holistic financial wellness. Iemas therefore offers free financial wellness training at the workplace to employees of contracted employers. Training modules include: how to budget; effective savings tips; escaping the debt spiral, the importance of having a will and a life file and what documentation to include, etc. During the 2017 financial year, 6,734 employees from contracted employers nationally benefited from the training.

Quick Polls

QUESTION

Millennials make up 30% of the South African job market; these are your clients and future clients. Do you engage with them?

ANSWER

No, not my target audience
Yes, the same as all my other clients
Yes, via social media
Some engagement but by far the most difficult generation to engage with
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