South Africa is home to one of the continent’s most sophisticated financial systems, yet 65% of respondents in a recent survey were declined credit by formal lenders, with rejection rates disproportionately concentrated among lower-income groups – forcing many to turn to informal sources.
They are rejected not because they lack economic activity but because their income doesn’t conform to the narrow, inflexible definitions that traditional lenders rely on. Without formal employment or payslips, aspirations like paying school fees, improving a home or expanding a business remain painfully out of reach. In a nation where unemployment stood at 32.9% in early 2025, expanding meaningful digital and financial access is imperative.
Structural challenges hamstring our economy
Our financial system was built around stable salaries, formal jobs, bankable collateral and predictability – conditions that simply don’t match the way most South Africans earn. “Everyday earners” – the traders, gig workers, informal entrepreneurs and microservice providers who keep households and communities functioning – operate outside the visibility of traditional assessment tools. Their earnings are variable, cash-based and undocumented. Their economic value is real but financially invisible.
Yet these same earners are far from unproductive. Across the continent, access to a functional smartphone alone has been shown to increase household consumption – an income proxy – by over 20%. In South Africa, nearly two-thirds of low-income smartphone users say they use their devices directly to earn money. The link between digital access and income generation is now unmistakable: the smartphone has become the modern work tool, marketing channel and business ledger. (Reference: Caribou, 2025, pages 22-24.)
The absence of fair credit has predictable effects: limited investment, constrained microenterprise growth and little capacity to absorb financial shocks. Nationwide studies consistently show that informal earners struggle to afford essentials, cannot cover unexpected expenses and have no cushion if income stops for even a month.
Models based on real earning patterns
Despite this, we can achieve a future where a panel beater in Chatsworth, a trader in Khayelitsha, a stylist in Mthatha or a gig worker in Gqeberha has the tools to earn, to build resilience and to participate fully in a digital economy.
How? A growing wave of alternative credit models is gaining traction across emerging markets. These designs move away from collateral and payslips and instead align repayment schedules with daily income patterns. Some use AI-driven assessments that analyse millions of micropayments to build credit histories for previously “unscorable” customers.
Evidence from M-KOPA’s seven million-strong customer base shows strong repayment reliability when credit products reflect the cash-flow realities of informal work. Transparency, data privacy and customer protection remain critical, but responsible alternative lending has begun to demonstrate that exclusion is a design flaw – not an inevitability.
M-KOPA data demonstrates inclusion works
M-KOPA’s experience across five African markets offers strong evidence that alternative credit models can be both inclusive and commercially sound. We have deployed more than US$2-billion in credit to over seven million customers, building one of the continent’s most extensive track records of lending to people without traditional collateral or credit histories.
Customer sentiment data reinforces this reliability: 94% of our users say loan terms are fair and transparent, up from 91% last year, and 88% report that M-KOPA’s loans are easier to repay than those offered by other providers. Women, who are often disproportionately excluded from formal finance, also demonstrate strong performance, being 5% less likely to default than men. In South Africa, we have reached more than 100 000 customers, underscoring that the model can function effectively even in complex, highly varied economic environments.
Several lessons emerge from our approach to inclusive credit. Most importantly, inclusion demonstrably works: 55% of our customers are accessing a product or service for the first time, and 43% of women are receiving their first formal loan, indicating how much latent demand has gone unmet by traditional lenders.
Flexibility is also essential. Customers can return products at any time, receive deposit refunds and face no penalties for paying on irregular days, which aligns repayment behaviour with the realities of variable income.
These features help build the trust required for long-term engagement. As a result, 86% of customers report an improvement in their overall quality of life after joining the platform.
Scale further demonstrates sustainability, with three million active customers across five markets participating in the model. And gender-intentional design remains a critical differentiator: in South Africa, women make up 49% of the customer base, the highest among all M-KOPA markets, showing what is possible when inclusion strategies are embedded from the outset rather than retrofitted later.
Towards a national inclusion agenda
If South Africa is serious about unlocking growth, digital and financial inclusion must become core components of economic policy, not peripheral development projects. A meaningful national strategy would need to include:
- Regulatory frameworks that recognise informal income for creditworthiness.
- Lower import taxes and mark-ups that keep smartphone prices artificially high.
- Affordable data access and resilient connectivity infrastructure.
- Local manufacturing investments to create skilled jobs and reduce device costs.
- Gender-responsive policies embedded from the outset, not retrofitted after implementation.
- Partnerships between telecommunications operators, insurers, fintechs, government and community organisations.
This level of coordination is difficult, but the payoff is substantial: increased household resilience, reduced unemployment, stronger microenterprise productivity and broader tax participation. What is needed now is scale – and a shared national commitment to inclusive economic design.
- The author, Cameron Kyle-Perumal, is GM of M-KOPA South Africa
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