With 33% of South Africa's people living in rural locations, it is becoming increasingly critical for this population segment to have access to ATMs for convenient access to cash, to not only pay for daily living expenses but also boost economic growth in these regions.
Marc Sternberg, MD of Spark ATM Systems says in order for economic development to occur, increased access to basic financial services such as ATMs must be provided to all South African citizens. "Currently, there are approximately 24 000 ATMs throughout South Africa and, according to our calculations, well under 10% of these are located in rural areas.
"The demand for access to cash in rural locations is on the rise and must be addressed, preferably by those operating in these areas so that the local economy can gain the most benefit."
This sentiment is mirrored by the latest Spark Cash Index (SCI) which measures cash withdrawal activity of approximately 1 700 Spark ATMs across the country, revealing a 1.30% month-on-month increase from June 2012 to July 2012 and a 9.09% year-on-year increase in cash withdrawals from ATMs located on farms.
David Wilson, senior analyst at IHS Global Insights, says the Eastern Cape, Mpumalanga, Limpopo and KwaZulu-Natal regions have the largest average withdrawal values for July 2012 according to the SCI data. "It seems that the more rural a province is, the higher the average withdrawal size that people make. One of the possible reasons behind this is the fact that rural areas are less developed and have fewer debit card facilities, therefore increasing the requirement for cash at most retail outlets.
In addition to this, most rural economies depend very heavily on informal retail trade. "The SCI data could indicate that informal retail trade in rural areas is growing at a rapid pace."
However, the problem of access to basic financial services is not unique to South Africa; the World Bank estimates that less than 10% of the 2.5 billion people living on less than US$2 per day have access to financial services of any kind.
"Not only does it cost rural dwellers additional money to travel to a bank or ATM located in urban areas, further reducing their amount of disposable income they can spend in the local economy, but it also presents a security risk to those people who have to travel long distances with their cash in their pockets.
In addition to this, as the ATMs are located so far away from a residential area, many people withdraw very large amounts of money at one time which does not assist them to budget and save cash towards long-term goals, while also presenting the risk of having the cash stolen, or lost, as they store it in unsecure locations at their home."
Sternberg says banks typically avoid placing ATMs in rural locations as they often prove unprofitable. "Rural ATMs do not process the same volume of transactions as urban ATMs. However, by installing ATMs on farms, community retail outlets or rural convenience stores, consumers will be more likely to spend money at the location where they have withdrawn the cash, meaning the money will be filtered back to the local economy and therefore assist to boost development in rural areas.
"Furthermore, these locations provide a safe and secure environment where the chances of the ATMs being tampered with for the purpose of fraud are kept to a minimum due to the watchful eyes of farm or shop owners."
Sternberg says that approximately 30% of Spark ATMs are currently located in rural areas and there is still significant potential for growth.
"Access to cash is a daily necessity and everyone should have the right to withdraw cash in a safe environment that is located close to their homes. Those organisations or people operating in rural areas should take the initiative to look for areas to install an ATM as a viable way to boost economic development and community morale," he concludes.
