The Department of Women, Youth and Persons with Disabilities (DWYPD) is pushing ahead with launching a new cooperative bank in South Africa, but it has missed its planned launch window of July 2024.
The bank, which has the proposed name of the SA Innovative Financial Services Cooperative (SAIFSC), will be more akin to a formalised stokvel than a mutual or commercialised bank.
Cooperative banks are more conservative in nature and invest the members’ money into secure funding and government bonds instead of riskier stock exchanges.
They also differ from mutual banks in that they operate under a common bond, either as a group of people who work together or belong to a particular association or geographical area.
The DWYPD outlined its plan for the bank in March 2024, where it provided a timeline and implementation plan for operations.
The department intended to commence with bank operations in July, but this has been pushed back.
The bank’s interim board, as the Cooperative Financial Institution (CFI) steering committee, met with the South African Reserve Bank’s Prudential Authority (PA) in January 2024 and submitted its application package and supporting documents, such as a membership registration file, bank statements, and business plan.
The department told BusinessTech that the CFI received correspondence from the PA and Financial Sector Conduct Authority on 12 August 2024 requesting additional documents to finalise their assessment of the application towards registration as a cooperative bank.
As such, the bank’s operationalization “will be dependent on the PA’s approval of the application for registration, at which point the CFI can lodge an application to the Co-operative Banks Development Agency (CBDA) for support to roll out systems and bank infrastructure to start operating,” the department said.
The department said that it does not have a new projected commencement date, noting that the CFI application process is still pending, subject to the assessment process that is currently underway by the PA.
However, the plan is still forging ahead.
As the department’s name suggests, the bank aims to advance the inclusion of women, youth, persons with disabilities, and their businesses and other co-operatives into the broader financial system. The target customers are also based in rural areas.
The bank plans to offering savings and investment products, with four savings products and four credit products currently available within its limited base.
In March, the bank reported having 461 members and a bank balance of R279,000, which the department, at the time, admitted is quite low. Since then, this has grown marginally to share capital of R298,000 (+R19,000) with 491 members (+30).
However, the department insisted that with a “limitless” potential, the department will undergo an extensive recruitment process to get more members when it gets its licence and launches the bank.
New banks for South Africa
The SAIFSC is one of four new banks that are set to launch in South Africa in the coming months and years—while other shake-ups are coming as established banks expand their services, or sell of entire operations.
Among the new banks, the Young Women in Business Network (YWBN) received its mutual banking licence at the start of the year, allowing it to push forward to a full launch for the group, likely in 2025 or beyond.
Mutual banks are ultimately owned by their depositors, who in turn become shareholders and can have a say in the bank’s operations. YWBN would be playing in the same space as Bank Zero Mutual Bank and Finbond Mutual Bank.
VBS Mutual Bank was also a prominent player in the sector before being liquidated due to the widespread corruption and looting of its depositors’ money. There are attempts to get VBS back up and running, though its future remains uncertain.
In the more mainline banking sector, financial group Old Mutual is in the process of launching its own full-service bank, which will compete with the established retail banks in the country. At last reporting, it is expected to launch sometime in 2024, having received its licence in April.
The bank is looking to take on Capitec on its home turf in the mass market segments, focusing on low-income and lower-middle-income individuals, who typically earn between R1,000 and R30,000 per month.
There is also another state-owned bank on the way, through Postbank, which has cleared several hurdles on its path to becoming a fully-fledged banking operation this year, splitting from the South African Post Office and forging its own path forward.
Meanwhile, Bidvest announced in July that it would be selling its banking operations, looking to identify a suitable acquirer by the end of 2024. It is not yet clear who will pick up the bank. It could mark an entry point for an entirely new banking brand in the country, or it could be absorbed into an existing operation.
Read: Major South African bank up for sale
