The purpose of this study was to determine the impact of the Mzansi account initiative on the performance of the Amalgamated Banks of South Africa (ABSA). The study also examined the financial and non-financial impact of the implementation of the Financial Services Charter Initiative from 2004 to 2008.
Introduction
Business Challenges
Background
Evolution of ABSA
ABSA Services
Mzansi Account
Why the Mzansi Account?
The Financial Sector Charter
The Living Standards Measure (LSM)
The LSM 1-5 Level
The Mzansi account was a response to the Financial Services Charter Initiative (FSCI) which is a voluntary initiative and agreement between ABSA, Nedbank, First National Bank, Standard Bank and Postbank to provide access to banking services to the previously unserved in banking and had insufficient banking services. Income recipients, hereafter referred to as PUULIE, living in remote and rural areas (FinMark Trust, 2004). According to a Treasury release report, poverty can mean several different things in the popular exchange of ideas; poverty can be thought of as a.
The Banking Environment
The Financial Charter Progress
Motivation for the Study
Focus of the Study
Problem Statement
Research Objectives
Research Questions
What is the cost-benefit ratio that Absa has incurred on its resources as a result of the influx of millions of new customers.
Limitations of the Study
Sources of Information
Data Collection
The credibility of data obtained from FinMark Trust and FinScope annual reports was endorsed by the following documentation by Nkosana Mashiya, who is the Chief Director of Banking Development and Financial Access, in the National Treasury (Suckwinder, 2007). When the national credit supervisory authority set new interest rate ceilings, decisions were based on indicators obtained from FinScope.
Data Analysis
While the researcher encountered restrictions in other methods of data collection, the following sources provided a large amount of the data that proved valuable for this study: FinScope FinMark Trust (2004), the Financial Diaries project funded by the FinMark Trust (2008), reports from the Ford Foundation and the Micro Finance Regulatory Council (FinMark Trust, 2008) and organizational websites, historical records of the Financial Sector Charter Council (FSCC, 2005), which has been established and is responsible for overseeing the implementation of the charter between 2004 and 2014 (FinMark Trust, 2008). Analysis of the internal and external, macro and business environment and evaluation of ABSA's financial data was undertaken to determine the impact of the Mzansi initiative on ABSA's profitability and performance and to answer the research questions.
Structure of the Study
Chapter Summary
Introduction
The South African banking industry is facing the most challenging time in the history of banking due to the changing economic landscape of South Africa which has brought about changes such as the need to cater to PUULIA (Goosen, Pampallis, Van Der Merve & Mdluli, 2001). Amidst the prevailing situation, the BIG4 (ABSA, FNB, Standard Bank and Nedbank) worked together through the Financial Services Charter to develop strategies to put in place the comprehensive mechanisms needed to serve the millions of previously unbanked and emerging underbanked markets , which was estimated at 14 million (Feasibility Pty Ltd, 2004).
The Macro Environment
ABSA and the Changing Business World
According to Arya, Bassi and Phiyega (2008), bank branch executive committee members supported ABSA Group's strategic intent to transform to achieve and exceed the minimum requirements of the financial sector charter. ABSA's executive team supports transformation initiatives with strong messages of commitment from the CEO and senior management who.
Political and Legal Environment
Businesses such as banks also had to respond to the prevailing socio-political changes by following regulations of the Financial Services Charter (FSC). This will provide huge socio-economic benefits in the long term, due to the fact that the more people are excluded from the economy, the smaller the market becomes, and a larger market benefits a larger proportion of people.
ABSA and the Mzansi Initiative
Access to Banking
In short, banks undertake to check whether banking services can be found within a distance of 20 kilometers from another service point, which will be in the form of a self-service interface or in the form of an automatic teller machine (ATM), a mobile agency or a brick. and mortar bank or a setup within community structures. Financial services that must be offered to the PUULIE in a simple and understandable manner.
Affordability of the Mzansi Account
Increase easy access to physical banking infrastructure, including branch networks and ATMs for disadvantaged black South Africans while ensuring their ability to access banking services through affordable products specifically designed to meet the needs of PUULIE. The majority of the previously unbanked and underfinanced low income (PUULIE) are people who are at the bottom of Maslow's hierarchy of needs and do not need higher level needs, but basic level products and services.
Economic Factors
Social Factors
Technological Factors
ABSA and Technology
Gitman (2003) claims that a revolution in the financial services creates large national institutions that displace local financial institutions and he believes that the major contributing factor to this growth is the new technology in services such as ATMs, electronic banking and Access to the internet. Institutions that can afford to build and support the necessary technological infrastructure will be able to continue their growth.
Business Forces
Business: Internal and External Forces
A company's functions and structure are influenced by a range of internal and external environmental factors. To understand organizations' activities and improve organizational performance, it is necessary to consider how companies achieve an internal and external balance on how to adapt to changes in their environment and the demands placed on them ( Mullins, 2002). .
Strengths and Weaknesses
Opportunities and Threats
The Five Forces
- Threat of Substitute Products and Banking Services
- Threat of New Service Providers
- Bargaining Power of Customers
- Bargaining Power of Suppliers
- Rivalry among Existing Banks
The environmental threat of new entrants or potential threat to the industry intensifies competition, erodes market share and lowers prices (Jones & . George, 2003). In the service industry, customers demand lower prices, quality service, so companies must respond to customers' needs.
Performance
Customer Satisfaction
The American Customer Satisfaction Index (ACSI) is a foundational model that companies use conscientiously to track customer satisfaction, overall satisfaction, and financial behavior. Gruca and Rego (2003) also confirm that customer satisfaction, properly measured, is a leading indicator of a company's financial performance.
Trend Analysis
Asset turnover describes how efficiently a company converts its assets into sales and this affects the company's potential growth, how fast the engine runs and how much assets are used to increase shareholder wealth (Firer et al., 2004).
Chapter Summary
Introduction
In this study, the researcher paid more attention to methodological limitations. The researcher examined the advantages and disadvantages of quantitative and qualitative research methods such as interviews, questionnaires, observation and experiments for case study research methods. In addition, method triangulation can be used to increase the validity of research findings (Blumberg et al. further state that "The rationale behind the use of multiple sources of evidence is that one develops converging lines of inquiry and can employ a triangulation process.
ABSA Shareholding
Business Description
- Retail Banking
- Corporate and Business Banking
- ABSA Capital
- African Operations
- Bancassurance
Retail banking offers a wide range of banking products and services to individuals and small business customers. Corporate and business banking offers a wide range of banking products and services to corporate, medium and large business customers.
Vision and Mission
A relatively long business description of the group's business structure adapted from ABSA's public domain is set out below. The group interacts with its customers through a combination of physical and electronic channels, offering the full spectrum of banking services, from basic products and services for the low-income personal market to customized solutions for the commercial and corporate market (McKay , 2008).
Purpose of the Mission Statement in ABSA
It directs how they should behave and inspires them to commit to competent and efficient performance that enables the organization to achieve its objectives.
ABSA Business Core Values
ABSA Compliance on the Mzansi Initiative
ABSA Group Structure
Products and Services
ABSA Mzansi Bank Account (AMBA)
If a withdrawal or purchase is required on the Mzansi account while the balance is greater than R15 000, customers are advised to visit an ABSA branch for assistance. Interest is paid monthly on positive (credit) balances and is calculated on the minimum monthly balance on the account.
Mzansi Affordability
The remaining four cash deposit transactions at an ABSA ATM or over the counter for the calendar month are for a basic deposit fee. Cash deposit transactions that exceed the limit of five (5) deposit transactions per calendar month, will result in the basic deposit fee and an additional transaction fee.
AMBA Transaction Fees
ABSA Business Strategy
Environmental Factors
PEST Factors
ABSA Internal and External Factors
External Factors
Prudent fiscal policies, a strong monetary policy and a strong regulatory framework have meant that the consequences of the global financial crisis have been limited in South Africa to date (Reserve Bank, 2005). ABSA President Gill Marcus (ABSA, 2008a) says “South Africa is not an island; there is no doubt that global economic conditions will affect domestic growth."
Financial Performance Measures
ABSA management expressed concern in the company's annual reports that South Africa as a country has not been immune to the global impact and that the domestic stock market has suffered in line with international markets.
Chapter Summary
Introduction
Research Methodology
- Research Approach
- Research Design
- Data Sampling
- Data Collection
- Reliability and Validity of the Findings of the Study
- Analysis of Data
The above is the principle underlying the rationale for choosing a case study as the design of this study. Case study research is not methodologically invalid simply because the selected cases cannot be assumed to be representative of entire populations (Blumberg et al., 2005).
Chapter Summary
The researcher will further analyze the macro and micro environment of ABSA in order to determine the performance of ABSA one year before the Mzansi initiative until 2008. In 2008, five years after the launch of Mzansi accounts, it can be said that a time has passed reasonable allowing for concrete performance measurements and conclusions to be made about ABSA's performance in relation to the Mzansi account (Appendix B).
Introduction
Performance of ABSA Results 2003-2008
- Indicator 1: Number of Automated Teller Machines (ATMs)
- Indicator 2: Staff Compliment and Number of Staffed Outlets
- Indicator 3: Number of Attained Customers
- Indicator 4: Headline Earnings per Share
- Indicator 5: Cost-To-Income Ratio
- Indicator 6: ROE and ROA Ratios
- Indicator 7: Service to Rural Areas
Results from non-financial workforce performance measures show an increase in the number of facilities staffed and the number of employees between 2003 and 2007 (Exhibit 5-2). It is notable that this growth in the number of staffed branches and an increase in the number of employees are an indication of an increase in costs for the bank.
Patterns of Saving Money
The poor have complex financial lives – most households use a range of financial services to meet their money needs. The poor are subject to frequent financial events - including requests to contribute to funerals, traditional festivals, crimes, injury or illness, loss of a regular job, births and weddings.
Mzansi Milestones
Although almost all households pay some form of debt every month, there is a wide gap between those with heavy debt burdens and those with minimal debt burdens. As a result, almost 80% of the population is now within reach of transactional banking services.
Chapter Summary
Introduction
What has been the Impact of Mzansi on ABSA‟s Performance?
Performance Indicators
However, it is worth noting that Mzansi account holders may have caused the sharp increase in customers that the bank saw between 2004 and 2006. The coincidence of the economic recession and ABSA's expansion may have caused the bank's total income to fall. .
What is the future of the Mzansi Account-holders with ABSA?
First, according to ABSA's Annual Report, it warned of the economic recession that led to an unexpected rise in interest rates accompanied by an increase in household debt until 2008. The bank's annual reports showed an annual increase in expansion-related spending for due to personnel and human resources issues, the expansion of ATMs, portable and mobile banks to reach among other PUULIE people.
Discussions Based on the Observation Study
- Objectives of the Mzansi Account
- Orientation of Mzansi Account-holders
- What Necessitated the Servicing of the PUULIE Market?
- How do the PUULIE, The Poor and South Africans Perceive Banks? 68
The researcher is aware that Mzansi account holders are authorized to use any of the BIG 4 ATMs. A provision of 0.2% of the sector's after-tax corporate profits is earmarked for consumer education.
Chapter Summary
This commitment has been endorsed by several stakeholders with a view to redressing the inequalities of the former apartheid regime. The business environment surrounding banking for millions of PUULIE has been a challenge to ABSA's resources and infrastructure.
Introduction
Implications of this Research
Recommendations
Recommendations for Future Studies
This study was conducted as a case study and focused on ABSA's performance from 2003 to 2008 using a case study triangulation data collection and analysis methodology. The researcher recommends a larger study on the impact of the financial charter initiative on banks after 2008 and additionally focuses on a larger sample of financial institutions, examining the impact of several variables on the non-financial measures of banks in South Africa.
Conclusion
Serving the Base of the Pyramid in South Africa: The Case of the Mzansi Basic Bank Account [Online]. Financial intermediaries in settler economies: the role of banking sector development in South Africa [Online].
APPENDIX A: Bank Ratios
The ratio between secured advances and total advances = (Advances secured by tangible assets + Advances covered by bank or government guarantees) / Advances.
APPENDIX B: ABSA Annual Reports that were analysed
APPENDIX C: Ethical Approval
