Low Penetration Rate in South African Financial Co-Operatives: Reasons from Supplier Perspective

Abstract

Background: The Co-operative Financial Institutions sector in South Africa is small compared to many African countries. Despite the important role that financial co-operatives play in poverty reduction and financial inclusion that is recognised by governments globally, no study has been conducted in South Africa in an attempt to find the reason behind this sector very low penetration rate. This study sought to investigate the possible reasons for the low penetration rate in the sector, focusing on supplier perspective. Aim/Purpose: The purpose of the study is to determine the reasons for low penetration rate in South African CFIs from their own perspective, reflecting on their entrepreneurial and innovative actions or strategies. Setting: The study considered all 28 registered CFIs and Co-operative Banks in South Africa. Twenty of them participated in the study. Method: The study used quantitative design to evaluate objective data. A structured questionnaire was used to collect data from 20 registered CFI representatives around the country. SPSS software was used to analyse data. Results: The study revealed that the low penetration rate in the CFI sector is due to consumer lack of knowledge and awareness about them, their products and their actions. Conclusion: The study concludes that the South African CFI sector needs to adapt and implement a systematic program that will enable them to reach out to more consumers. The findings may also give other stakeholders like the government, a better idea on what they should do to assist the sector.