The survey, released yesterday by research group FinMark Trust, found that since October 2004, 1,9 million people opened an Mzansi account, a low-cost bank account aimed to help South Africa's poor enter the banking system, but most still lacked basic banking knowledge.

When banks launched the Mzansi account, they estimated that some 13 million low-income South Africans had no access to banking services.

"South Africans still show little understanding about financial terms.

Most still want the basic knowledge about how to draw up a budget, what interest rates are and so forth," said Mark Napier, author of the study.

It found that more than a third of South Africans wanted to know more about how interest rates work and how to draw up and manage a budget effectively, while a quarter were merely interested in how much credit they could afford.

South Africa's debt levels have continued to rise, with credit extended to the private sector up by a record 27,48 per cent year-on-year in October and household debt at 70 per cent of disposable income - an all-time high.

"It is a mistake to say that South Africans are reckless about credit, and we can't even tell whether they are over-indebted or not.

What we can say though, is that most recognise that they need to understand credit and interest rates better," he said.

Napier said many South Africans still preferred informal saving vehicles such as burial societies and savings clubs, with the number of people using them increasing respectively to 19 per cent in 2006 from 14 per cent in 2005 and to seven percent from five per cent.

"The informal market is very much alive and vibrant, people are not deserting their old ways of saving for the formal market.

The two are complementary," he said.

However, the life insurance industry has not benefited from more people coming into the formal market, with the number of people with life insurance falling to 10 per cent in 2006 from 12 per cent last year.

"There are low levels of trust for the life insurance industry and people also don't understand how it works," Napier said.

The industry has come under the spotlight in the past year after the country's pension fund adjudicator made a series of rulings against high termination penalties and raised concerns about poor disclosure.

Insurers this month started making compensation payouts to affected clients under a 2,6 billion rand deal reached with the finance ministry a year ago to enhance retirement payments made to clients since 2001.

But Napier said he could not comment on whether the negative publicity was the reason behind people's distrust of the insurance industry.

Nampa-Reuters

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