Reimagining the Unbanked: Perspectives from South Africa

This paper draws on evidence generated by the financial diaries of 152 households in three low-income communities in South Africa, between November 2003 and December 2004. It attempts to draw lessons for the U.S. from the South African experience.

The diaries reveal that South African low-income households are active financial managers. Findings indicate that:

• People devoted considerable energy to strategizing about finances;
• Low-income households had financial goals similar to ones seen in better-off households,
• When unexpected events hit, households augmented savings with funds from a variety of sources, none of which were cost-free;
• Finding ways to convert short-term accumulations into a pool of accessible savings was a continuing concern;
• Households were more likely to need consumer finance than microenterprise loans.

The choices households made suggest that they need access to credit for flexible purposes. It is therefore necessary to review consumer finance in a more constructive light. Moving away from a strict focus on asset building toward improving access to basic banking services may be a better way to help low-income, but savvy money managers get what they need to improve their lives.