First National Bank (FNB), a division of FirstRand Bank Limited, has announced its partnership with Selpal, a South African FinTech company that operates specifically in the township and informal economy, or the “Unseen Economy”.
Michael Vacy-Lyle, CEO of FNB Business explains that “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”.
Statistics show that there are around 30-40 businesses per 1,000 people in townships. FNB estimates that this translates into around 800,000 to 1million 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.
“Access to financial services is critical for the growth of any economy and these businesses should be included into the financial system. Transactional banking, investing, lending and insurance opportunities exist in this unseen space” says Vacy-Lyle.
Selpal is a unique technology start-up company that has developed an integrated system that connects informal retailers such as spaza shops (community grocery stores) with FMCG (fast moving consumer goods) suppliers, wholesalers and brands. The user-centric platform 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.
Stephen Goldberg, the CEO and co-founder of Selpal explains “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”.
Most townships have businesses operating in the following main sectors:
1. Grocery retail / “spaza shops” and the supply of fast moving consumer goods;
2. Taverns / “shebeens”;
3. Hair care;
4. Motor & cellular repair and service;
5. Educare; and
In due course FNB together with Selpal intends addressing the needs of all these sectors.
The largest opportunity presents itself in the FMCG space – spaza shops and other retailers. These businesses tend to employ three or more people, but are largely run on a cash basis and are often unbanked. There is a clear need to provide cost effective and safe financial solutions into this space.
“The Selpal system, offers a unique value proposition to almost all participants in the FMCG value-chain; from the brand owners to the wholesalers, distributors, the retailers to the end consumers, and now with the FNB partnership, we are planning to expand our integrated ordering and payment functionality which will make it easier and safer for all these participants by further removing cash” says Goldberg.
FNB Business has been on a mission to provide meaningful and relevant solutions to help support and grow businesses in South Africa’s informal or “Unseen Economy”, including businesses operating within townships.
“We have been working on multiple strategies over the last 18 months to really help make a difference to the informal business market in South Africa. The Selpal business model is a great fit to enable one of those strategies, namely the integration of FMCG value-chains to not only reduce cash as a payment instrument in the economy, but in so doing hopefully include these informal businesses into the formal financial services world; offering them real value, efficiencies, helping them manage risk and reduce costs in their businesses” explains Jesse Weinberg, Head of the SME Segment at FNB Business.
The partnership between Selplal and FNB goes beyond creating efficiencies and the removal of cash in these markets, at its core, this partnership is focused on better understanding and servicing micro-enterprises in the townships with a view to uplifting communities and driving financial inclusion. It includes finding a relevant and efficient way of reaching both businesses and consumers to drive financial inclusion.
“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” concludes Weinberg.
Recently, FNB Business was once again voted “SA’s Best Business Bank” for the sixth year in a row according to the Sunday Times 2018 annual survey. The bank continues to pioneer in providing meaningful solutions for entrepreneurs, and is committed to finding ways to help support and grow this incredibly important segment of our economy for the betterment of the South African economy.