A partnership between one of South Africa's largest banks, First National Bank (FNB South Africa), and a South African FinTech startup, Selpal, hopes to unlock the country's township economy. The partnership between Selpal and FNB South Africa wil seek to provide cost effective financial solutions to South Africa's spaza shops - small retail outlets based in townships that employ 1 to 3 people.
Selpal has developed a system that connects spaza shops with FMCG (fast moving consumer goods) suppliers, wholesalers and brands.
“With 50% of South Africa’s urban population living in townships, the ecosystem supporting these communities warrants significantly greater focus from the banking sector. We refer to this opportunity as the 'Unseen Economy' – the opportunity space that most call the informal sector or the township economy. These businesses range from survivalist businesses to often highly organised and sizeable SME operations. At FNB Business we are of the view that this business segment of the South African economy has been ignored for far too long," said Michael Vacy-Lyle, CEO of FNB Business.
Financial inclusion for South Africa's unseen economy
In announcing their partnership, both FNB South Africa and Selpal have said that one of the key aims of rolling out the FinTech distribution platform in townships is to help solve financial inclusion. Given that spaza shops operate mainly on a cash basis, this could well be the case that, depending on adoption, Selpal and FNB South Africa will improve financial inclusion in this sector of South Africa's economy.
Statistics show that there are around 30-40 businesses per 1,000 people in townships. FNB South Africa says it estimates that this translates into around 800,000 to 1 million businesses. The majority of these are survivalist businesses, with around 300,000 representing entities employing three or more people. FNB believes that these businesses are under serviced from a banking perspective mainly due to cash being the predominate form of payment for them.
"Selpal is an agnostic virtual distribution platform which electronically enables the way in which products are ordered, paid for and sold in the unseen economy. Using proprietary hardware and software that we have developed, we are creating a network of partner store traders which we equip with a Selpal POS (point-of-sale) device that lets them view, order, pay for and sell stock and value added services without the store-owners ever needing to leave their shop, and unlocks extra revenue for them. It also changes the way that their customers buy from them, extending the benefits and extra value to the end consumer. Our partnership with FNB Business will help expand our network and supercharge our growth. Every Selpal store will provide a potential service point for financial access and inclusion. The FNB partnership brings both credibility and access to FNB's significant expertise around financial regulation and payments infrastructure, which will bring value to all participants in our ecosystem," said Stephen Goldberg, CEO and co-founder of Selpal.
Digitizing South Africa's informal economy
Selpal 's platform, according to the FinTech startup, was designed and built using direct observations, engagements and understanding of the pain-points that various users experience along the entire FMCG value chain in the informal sector, from manufacturer to consumer. The other aim, is to digitize the informal economy and also remove cash from the way spaza shops operate.
“Our plan is to help grow and then leverage Selpal’s footprint in townships nationwide to further deliver financial services to this 'Unseen Economy', in the form of transactional capabilities as well as financial services products. The partnership is aimed at disrupting years of historic systems that have kept businesses in the informal and township markets financially excluded, and this means a fresh and unique approach at connecting all parts of the ecosystem” concluded Jesse Weinberg, Head of the SME Segment at FNB Business.
Cover image credit: Mashugu Cash Store, Makupula Street, Kayamandi, Stellenbosch. HelenOnline/Wikimedia Commons