Can a state-owned bank be a catalyst for financial inclusion and economic development in South Africa? Lessons from China and India

Doko, Nkosindiphile

Can a state-owned bank be a catalyst for financial inclusion and economic development in South Africa? Lessons from China and India

Thesis / Dissertation

2025

Publisher

University of Cape Town

Department

Graduate School of Business (GSB)

Faculty

Faculty of Commerce

Abstract

The role of state-owned banks in the banking sector as well as countries' economic development is an important topic for debate. It should not be left to the private sector to address market failures. Several studies have been conducted on the role of banking in economic development, however few have examined the role of state-owned banks in financial inclusion and economic development, or the conditions required for the successful establishment and operation of a state-owned bank. The main objective of this study was to draw lessons from China and India as emerging economies that have been able to successfully establish and operate state-owned banks and use them as instruments to improve financial inclusion and economic development. To that end, the researcher produced a conceptual framework that can be used in South Africa to establish a state-owned bank. The research was carried out using qualitative documentary analysis to obtain secondary data from academic papers, central bank reports and statistics. The results of the study reveal that a clear government policy and political support are important conditions for the successful establishment of a state-owned bank (SOB), as these allow for the creation of enabling laws and a supportive regulatory environment. The study also found that SOBs have the capacity to expand the accessibility of their financial services nationwide using both physical and digital infrastructure. The success of SOBs in China and India – two BRICs countries – demonstrates that these banks will continue to play an important role in the world's banking industry and can positively contribute to the financial inclusion and economic development of these countries. The study therefore recommends that South Africa's policymakers consider the conceptual framework devised to establish an effective SOB that can help improve the level of financial inclusion and economic development in the country.