BoE Bank, part of the renamed former Boland Bank taken over by top-end-of-market financial services company BoE Ltd, is hoping to provide banking services to hundreds of thousands of South Africans who have been excluded from the banking system because of high charges, minimum deposit requirements and low interest rates on savings account deposits.
BoE Bank has joined forces with retail group Pepkor to bring low-cost savings accounts to the unbanked and provide unsecured loan facilities to people, many of whom have been left to the mercy of loan sharks.
Branded PEP Bank, the new financial arm of BoE, is being rolled out from the Western Cape, where pilot projects have been operating for some months.
Herman Engelbrecht, general manager of PEP Bank, says its main target market is lower income employed people, many of whom have been unable to afford banking services. The BoE initiative puts paid to many of the arguments by the banking industry that it is too difficult and expensive to supply banking services to the lower end of the market.
PEP Bank makes extensive use of technology to bring accessible and affordable banking to individuals. Gone are large banking halls in prestige buildings and high levels of individual service. Instead, the system relies on the extensive use of ATM cards and rapid administration.
The cost savings are passed on to customers as higher interest rates on savings and lower service charges. The basic elements of PEP Bank's services are:
Savings accounts
* Accounts can be opened with a minimum amount of R10, with a minimum balance of R10 thereafter;
* At least six percent interest will be paid on minimum balances of R10 and then increased on a sliding scale to eight percent on amounts over R75 000;
* Maximum cash withdrawals are R2 000 on any one day;
* Withdrawals made from PEP Bank, NBS and BoE Bank ATMs cost R1.40, while Saswitch fees apply on withdrawals from other bank terminals. There are no charges for balance inquiries on PEP, NBS and BoE Bank ATMs. There is no limit on the number of withdrawals;
* Debit and stop orders can be placed on the accounts;
* Bank guaranteed cheque payments can be arranged; and
* Only deposits, not withdrawals, can be made over bank counters.
Unsecured loans
* The loans are provided to employed people, whose salaries or wages are paid directly by the employer into a PEP Bank savings account;
* Interest rates vary from two to five percent a month (24 to 60 percent a year) on loans between R500 to R10 000, with repayment periods between one and 36 months. This is far lower than the 30 percent a month many loan sharks charge. The shorter the term and the lower the amount, the higher the interest rate; and
* Loans are subject to an affordability test. Borrowers must be able to show that they will have a minium of R750 a month available to support their families after the loan is taken.
The bank is planning to introduce start- up housing loans of between R50 000 and R60 000 as well as life assurance products, such as funeral policies, and investment products, such as unit trust funds with low investment minimums.
There are plans to open 43 branches during the next 12 months and 50 branches over the 12 months thereafter. The branches will handle applications, account instructions and deposits. Withdrawals must be made at ATMs.
Engelbrecht says Pep Stores has built up a solid reputation of trust over 30 years and it is for this reason that BoE Bank has entered into a relationship with Pepkor.
Branches of PEP Bank are being constructed in the forecourts of Pep Stores outlets or immediately adjacent to the stores so that customers, who trust the Pep brand, associate the brands.