FinScope TM SA 2005 Survey Findings Launch 25 October 2005

1. FinScopeTM SA 2005Survey FindingsLaunch25 October 2005

3. Track changes between 2004 and 2005 (based on 16+ age group) with emphasis on the financial sector Understand factors influencing the financial services sector � employment, poverty, access to services, living standards and the like Understand who is engaging in the financial services sector � who is using what? Understand the reasons people are not using financial service categories Determine how people are engaging with financial service categories Understand the different needs and behaviours of people through segmentation � the Financial Services Measure (FSM) FinScope Objectives

5. FinScope� 2005 suppliers

6. FinScope�: Robust study Nationally representative sample of 3,885 respondents Area based sample, drawn by and results and weights verified by Prof. Dawie Stoker

7. Financial Sector Charter targets Effective access - 20km to nearest service point: LSM 1 � 5: 80% access to transaction products and services LSM 1 � 5 : 80% access to bank savings products and services LSM 1 � 5 : (a percentage to be agreed) access to life assurance products and services LSM 1 � 5 : 1% plus 250 000 access to formal collective investment savings products and services LSM 1 � 5 : 6% access to short term risk insurance products and services

8. Financial Sector Charter Personal income by LSM group

9. Financial Sector Charter Population by LSM

10. Financial Sector Charter Racial dispersion by LSM grouping

11. Financial Sector Charter LSM 1-5 by geographic area type

12. Financial Sector Charter Insurance penetration by LSM group

13. Financial Sector Charter LSM 1-5 in summary 63% (19m) of adult population 79% of whom have monthly incomes of less than R1,000 �but of whom 21% (4m) have incomes of between R1,000 � R6,000 94% black 10,3m living in rural areas 68% unbanked; 95% uninsured, long or short 3,1m child grant recipients (total 3,6m)

14. Access strand of financial services

15. Poverty Unemployment Physical access Financial literacy Negative perceptions

16. PovertyPersonal income

17. PovertyGone without basics

18. Unemployment

19. Physical accessHave access to a bank �nearby�

21. Negative perceptions and experiences  Banking service fees (61%) long queues (68%) only 51% say banks �show respect� Insurance cannot get money quickly (25%) only 11% say insurance companies �show respect� Microlenders don�t understand how they work (30%) not understanding when payments can�t be made (20%) too much credit and service fees too high (17%)

22. Life insurance Backdrop death or serious illness of main wage earner �likely� (14%) 20% have lost a family member in the household, 40% outside the household job loss of main wage earner also �likely� for 14% 78% have no medical cover perceptions of precariousness Perceptions not all negative 17% don�t use but would like to Trust in life companies as preferred source of advice

23. Life insurance 69% say they can�t afford it �Skipping� premiums to make up the difference later not an option for a quarter of people Low levels of understanding One third do not understand how life insurance companies work 43% would want to be sold insurance by a broker or a company representative Affordability concerns suggest need for trust Consequences More affordable products Product innovation to meet needs (eg job loss) Distribution needs to retain some personal contact

24. Short term insurance Low penetration 92% have never had car insurance only 6% have household contents short term insurance virtually non-existent in the black population even FSM4 (90% banked, full time formally employed) � 3% usage Reasons for not insuring affordability (46%) don�t need it (30%)/nothing to insure (5%) 31% say they don�t understand how it works

25. Banked/unbanked

26. Banked/unbanked

27. Characteristics of the unbanked

28. Awareness of Mzansi(as at July 2005)

29. Reasons for not bankingBank vs Mzansi

30. Cash

31. Cash Strong adherence to cash overall 83% of clothing purchases preferred payment means for life and short term insurance FSM 3-6 split loyalties towards cash: Highest incidence of stokvels and burial societies �but also of bank savings accounts Thirst for financial education highest in these groups Debit card usage - 92% of FSM5 have an ATM card but 67% �have never had� a debit card debit cards not in the Top10 of transactions ..but debit card usage now 14% (up from 10%) 30% of banked population using debit cards

32. Retail The most popular form of financial service after bank accounts ..but 28% say too much credit Strong demand from black population for funeral, education and savings products FSM 3-6 shows incidence of approximately 41% store card usage LSM 1-5 shows incidence of approximately 38% store card usage

33. Cellphone access

34. Understanding cellphone banking

35. Understanding technology

36. Summarising the changes Over half a million new bank accounts (up 4%, mainly non-Mzansi) but the adult population is also growing Mzansi � making an impact but creating mixed opinions Clear interest in cellphone banking as access to cellphones grows Retail financial services showing steady growth Informal product usage slowly declining � but loyalties strongest in middle tier FSMs Much has not changed: Low incidence of formal insurance Some (but not all) demographic indicators have got worse Life not close to ideal Gone without cash Loss of family members

37. So what does it all mean? Access targets for banking now seem very distant Accessibility will far exceed active usage by 2008 1% increase in banked 46% �can easily live life without a bank account� � 27% of currently banked people agree with this statement! Mzansi clearly not the silver bullet Adherence to cash continues Convenience of cash is compelling Where are the debit cards? Expectation of price competition Mzansi and cellphone banking Watch the FSM 3-5s! Many already banked but they are hungry for more products and more knowledge Need for cheaper, simpler products, especially in insurance Financial literacy Urgent need for financial literacy support across the industry Convenient access to money advice

38. FinScope� developments Spin out FinScopeTM South Africa Academic host Multi-funding deal Africa expansion Tanzania, Uganda, Zambia, Kenya Ghana, Nigeria FinScopeTM Small Business Study Pilot in Gauteng province FinMark Trust and Gauteng Enterprise Propellor