Sep 11, 2012
After decades of violence, segregation and inequality during apartheid, South Africa has made significant efforts to bring equality and stability through structural shifts in its economy. Two South African banks, Rand Merchant Bank and Nedbank, are developing innovative financial products targeted at South Africa’s low-income housing market. Both projects, planned for public rollout in 2007, are in line with the Voluntary Financial Services Charter, a black economic empowerment strategy designed by the private sector with government support.
Rand Merchant Bank finances affordable housing programmes that favour social diversity in township areas. Nedbank makes mortgages available to low-income people. They are pursuing a market previously left out— people too poor to qualify for traditional housing loans but above the government’s qualification for receiving public housing support. The case examines the development of the two financial products, including the barriers encountered and the innovations to overcome them, along with the expected outcomes, the lessons learned and future opportunities for growth in the low-income housing market.