Digitised Paratransit Can Catalyse Financial Inclusion

March 1, 2023
Financial Inclusion
3 min read

The minibus taxi industry is an important part of South Africa’s public transportation system, providing affordable and convenient transport to millions of people daily. However, the industry has also been criticized for contributing to financial exclusion, particularly among low-income households.

Here are some ways in which the minibus taxi industry promotes financial exclusion:

  1. Lack of fare regulation: Unlike other forms of public transportation, the minibus taxi industry operates without any fare regulation. This means that fares can vary significantly depending on the time of day, the route, and the operator, making it difficult for passengers to budget and plan for their transportation expenses.
  2. Cash-based transactions: The vast majority of minibus taxi transactions are still conducted using cash. This presents a significant barrier to financial inclusion, as many low-income households may not have access to banking services or digital payment platforms
  3. Limited access to credit: Many minibus taxi operators are small-scale entrepreneurs who lack access to formal credit facilities. This limits their ability to expand their businesses or upgrade their vehicles, which in turn can affect the quality of service they provide.
  4. Safety concerns: The minibus taxi industry has a reputation for being unsafe, with high accident rates and incidents of violence and theft. This can discourage passengers from using the service, particularly those who are more vulnerable, such as women and children.
  5. Lack of insurance: Many minibus taxi operators do not have insurance coverage for their vehicles or passengers, which can leave passengers vulnerable in the event of an accident or other incident.

All of these factors contribute to financial exclusion, as they limit the ability of low-income households to access affordable, reliable, and safe transportation. This can have a ripple effect on their ability to access education, healthcare, and other essential services.

User experience field work by Loop: https://youtu.be/O43bc7wOCYU

To address these challenges, policymakers could consider implementing the following measures:

  1. Fare regulation: Introducing fare regulation for the minibus taxi industry would help provide greater transparency and consistency in pricing, making it easier for passengers to budget and plan their transportation expenses.
  2. Digital payments: Encouraging the adoption of digital payment platforms could help reduce the reliance on cash-based transactions, making it easier for low-income households to access formal financial services.
  3. Access to credit: Developing formal credit facilities for minibus taxi operators could help them expand their businesses and upgrade their vehicles, improving the quality of service they provide.
  4. Safety and insurance: Improving safety standards and requiring insurance coverage for vehicles and passengers would help improve the reputation of the minibus taxi industry and make it a safer and more reliable transportation option.

In conclusion, the minibus taxi industry has the potential to contribute significantly to financial exclusion, particularly among low-income households. However, policymakers could take steps to address these challenges, such as introducing fare regulation, promoting digital payments, improving access to credit, and improving safety standards and insurance coverage.

By taking a more comprehensive approach to addressing financial exclusion in the minibus taxi industry, policymakers can help ensure that all South Africans have access to safe, affordable, and reliable transportation.