Understanding the drivers of financial inclusion in South Africa

Abstract

Orientation: Financial inclusion is becoming one of the attractive topics at the global level with policymakers, development partners, governments and financial institutions developing interest in understanding it more deeply.

Research purpose: The study sought to establish the drivers of financial inclusion in South Africa with a focus on factors that influences ownership of an investment account.

Motivation for the study: Motivated by the increase in the evidence of the importance of financial inclusion in fighting poverty and the fact that by merely having a bank account, financial inclusion cannot be guaranteed, the study interrogated the factors that influence households to have an investment account.

Research approach/design and method: As the dependent variable of financial inclusion was binary, the logistic regression was used to estimate the drivers of financial inclusion. The variable assumed two values 0 and 1, where 1 represents access to an investment account and 0 otherwise.

Main findings: Using the logit model, the study discovered that financial inclusion is driven by age, education level, the total salary proxy of income, race, and marital status.

Practical/managerial implications: The differences in the probability of demand for financial products and services amongst the different races mean that products and services tailor-made to satisfy the needs of the different races, for coloured and black people these products and services should be designed to improve financial inclusion amongst them.

Contribution/value-add: The study managed to discover the factors that influences households to have an investment account in South Africa.