South Africa’s Postbank is still waiting for its banking licence

South Africa’s Postbank is still waiting for its banking licence

Postbank has been waiting for a year to get a response to its banking licence application from the South African Reserve Bank, which would allow it fulfil a government pledge to use its 1,500 outlets to give poor and rural communities access to credit.

The delay has been widely covered in the South African press, since Postbank’s application for authorisation to establish a bank, which it made to the SA Reserve Bank in September last year, has been drawn out – and the ­state-owned company does not appear to know why.

“Unfortunately, we cannot comment on that as it forms part of the [Reserve Bank] process,” spokesperson  said this week.

The application, which is the first in three steps to obtain a banking licence, usually takes up to six months. Without it, Postbank will not be able to register a company to carry on the business of a bank, which it will need to demonstrate compliance with any conditions the Reserve Bank may impose on it over a period of up to 12 months before giving it a banking licence.

Should it get the licence, it will have the ability to lend money to its customers.

The SA Post Office company, headed by managing director Shaheen Adam, has been gearing up to apply for the licence for some time, and did so in September last year. But its plans to move into lending after the collapse of African Bank, which also targeted less wealthy sections of the population, appears to be a risky move.

The Post Office’s latest annual report shows it had R4.5 billion in deposits in the year to March 2013, up 5% on the previous year, while investments were up 6% at R6.2 billion. According to the report, it had 7.3 million customer accounts.

Qoma says once the banking licence is approved, Postbank will seek permission to expand its current offerings to lending. “Our primary interest is to protect depositors and [we] will not embark on any strategy that compromises this key objective,” he said.

But besides its existing customers, the bank may have a ready clientele in less obvious quarters: small-scale farmers. These number about 2.6 million, according to a 2012 study by the Institute for Poverty, Land and Agrarian Studies.

Dawie Maree, senior economist at agriculture industry association AgriSA, said smaller farmers, who might already be indebted, struggled to access finance.  “Distance to banks is especially an issue for smallholder farmers in remote rural areas,” he said. “And specifically to get access to Land Bank branches – there are very few and only in main centres, so access to these facilities by smallholders is a problem.”

The Post Office has close to 1,500 outlets, some in remote rural areas, placing it in an advantageous position.

Maree said that while he did not personally think Postbank was widely used for farming purposes, its planned lending services could help small farmers in remote areas to access credit. “I think that lending services at Postbank can alleviate the problem. However, the involvement of the Land Bank will be preferable,” he said. “I think a collaboration between Land Bank and Postbank for agri-specific finance might be a solution.”

Qoma could not answer detailed questions regarding the lending services Postbank planned to offer because the licence application was at a sensitive stage.

“The lending strategy is still being formulated, and it is premature to divulge details in this regard,” he said.

The Land Bank’s financial boss, Lebogang Serithi, said it had entered into partnerships with a number of intermediaries in the agriculture sector to facilitate the provision of funding in areas where it does not have a presence.

“The Land Bank is continuously looking for new partners, and these partnerships will be put in place to the extent to which the Land Bank is happy with their risk mitigation measures and/or their credit-granting processes,” he said.

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