Joseph Raditsele, a middle-aged laborer at a paint company, is exactly the sort of new customer that First National Bank had in mind when it opened a branch in Soweto. Raditsele had never had a bank account before and used to keep his savings under his mattress. Then he started to fear a burglary. "The money will be safer at the bank," he says.
South Africa's big banks are going all out to woo clients such as Raditsele. It's not that the market is lucrative. After all, these customers' balances are scarcely high enough to cover transaction costs. But the banks have a long-term incentive to bring their services to the country's millions of poor blacks. In the aftermath of apartheid, banks have a chance to lead the way to economic independence and, ultimately, prosperity for South Africa's black majority. Without mortgage lending, the 7 million South Africans who still live in shacks will never turn to the housing market. Without startup loans, small businesses will never develop. "If people don't use banks, the prospects for this country aren't very good," says Bob Tucker, chief executive of year-old E Bank, which was created by Standard Bank of South Africa Ltd. to help fill the void.
OVERLOOKED. Bringing black South Africans into the economic mainstream will spell the difference between a successful transition from apartheid and a firestorm of social unrest and political upheaval. The government is applying direct pressure to make the banks the agents of change. In recent bidding for the coveted banking business of South Africa's nine new provincial governments, for example, authorities chose the winners in good part based on their commitment to affirmative action and social responsibility.
The marketing challenge alone is formidable. An estimated 10 million adults, mostly poor and black, have no bank accounts at all. An additional 8 million have so-called transmission accounts, many linked to automated teller machines, in which their salaries are deposited. When the banks sold payroll services to corporate customers, employees became account-holders by default. But they have never really been thought of as customers, with products tailored for them, access to credit, or efforts to educate them about financial matters.
Now, banks are sending out black staffers who can turn banking into something accessible, even fun. Peoples Bank is a division of financial-services giant Nedcor Bank Ltd. that has been repositioned to serve low-income people across the country. It hired Mokela Michael Mokgohloa as an accounts manager to change the habits of neighborhood savings societies around Johannesburg. Such societies, or stokvels, typically pool their savings to buy groceries, pay for funerals, and even build houses. Mokgohloa's job is to get those savings out from under the floorboards and into interest-bearing accounts.
To make his pitch, Mokgohloa attends neighborhood barbecues. He organizes promotional giveaways with pen or cola companies to attract bank customers and splices ads for home loans into the music videos shown at shopping centers or bank branches. In the tough East Rand township where he grew up, Mokgohloa says, no banker would have even thought of paying a visit. "Now," he says proudly, "there is relationship-building."
Security remains a chief concern for banks and their new customers. For that reason, nearly all the new banks are pioneering microchip-embedded debit cards. Wary of carrying large amounts of cash in the crime-plagued townships, account holders can make electronic payments for everything from clothing to food with their cards, which automatically keep track of their balances. And ultimately, the "smart" cards will save issuing banks money. Costs are lower for automated transactions, and unlike magnetic strip cards, "smart" cards don't tap into a bank's mainframe system.
To guard against card fraud and other abuses, E Bank is piloting ATMs that keep authorized card users' pictures on file electronically. And First National Bank of Southern Africa Ltd. uses electronic fingerprint matching at truck-mounted cash machines that travel the countryside dispensing government pension payments to the retired and elderly. Amazingly, such high-tech measures have won the confidence of many who formerly kept everything in cash.
Besides finding ways to reach their new customers and making them feel safe, another challenge for banks is finding acceptably profitable ways to handle low-income clients. Dispensing with marble counters and investment consultants, they are focusing instead on the services their new customers need--without losing money. For instance, Nedcor's Peoples Bank branches gffer only passbook-savings accounts and debit cards that allow most transactions to be automated. Checking accounts, credit cards, and mutual funds aren't available.
Tucker boasts that his E Bank is less a separate bank for poor customers than a "special delivery channel," often located inside Standard Bank branches. Long a maverick in corporate circles, Tucker is outspoken about the need to end the Eurocentric bias of conventional banking. E Bank charges higher transaction fees than some other banks that serve the new market but adds extras that are important to its clients--free funeral-cost coverage, monthly prize drawings for regular savers, and Sunday hours.
Unlike E Bank and Peoples Bank, First National Bank has not created a separate brand name to serve low-income customers. But it is tailoring its services. Its new branch in Soweto is simply a corrugated metal shipping container with a polished wood door, an ATM, and a single staffer to open accounts. Edgar Blomeyer, an assistant general manager for FNB, insists his bank is "the same for all people."
GUARANTEES. Still, the vast difference between full-service banks that cater to whites and the bare-bones facilities for new black customers has attracted criticism. One bank calls the gap "condescending apartheid stuff." And the big banks are a long way from offering equal credit. To help end red-lining, the Mandela government has created a Mortgage Indemnity Fund to guarantee mortgages against "boycott" defaults--when people don't pay their debts out of protest. And the banks agreed in June to write 50,000 loans to blacks within 12 months. But the actual lending pace has been slow, and interest rates for small loans are several points higher than on the larger ones taken by richer, white customers.
Under pressure to get banking services to poor clients, the mainstream banks joined forces with several philanthropies to provide startup capital for a new lender, Community Bank. Opened in 1994, the bank is funded by grants for community education and does not have to answer to profit-hungry stockholders. So it will be able to spend more resources on lending to low-income South Africans and developing their banking savvy.
At the first annual general meeting in July, depositors asked questions for 4 1/2 hours. "Community Bank is a response to a gap," says Managing Director Archie Hurst. He looks forward to a time when his customers can migrate to more sophisticated banking as they gain affluence. It will be a sign that the country is normalizing when income, not race, determines where South Africans bank. For now, though, just introducing the black populace to the joys of compound interest represents progress.