Banking the unbanked: the Mzansi intervention in South Africa:

Abstract

Purpose
This paper aims to understand household’s latent behaviour decision making in accessing financial services. In this analysis we look at the determinants of the choice of the pre-entry Mzansi account by consumers in South Africa.

Design/methodology/approach
We use 102 variables, grouped in the following categories: basic literacy, understanding financial terms, targets for financial advice, desired financial education and financial perception. Employing a computationally efficient variable selection algorithm we study which variables can satisfactorily explain the choice of a Mzansi account.

Findings
The Mzansi intervention is appealing to individuals with basic but insufficient financial education. Aspirations seem to be very influential in revealing the choice of financial services and to this end Mzansi is perceived as a pre-entry account not meeting the aspirations of individuals aiming to climb up the financial services ladder. We find that Mzansi holders view the account mainly as a vehicle for receiving payments, but on the other hand are debt-averse and inclined to save. Hence although there is at present no concrete evidence that the Mzansi intervention increases access to finance via diversification (i.e. by recruiting customers into higher level accounts and services) our analysis shows that this is very likely to be the case.

Originality/value
The issue of demand side constraints on access to finance have been largely ignored in the theoretical and empirical literature. This paper undertakes some preliminary steps in addressing this gap.