Banking patronage motives of the urban informal poor Stephen Graham Saunders School of Business and Economics, Monash University, Roodepoort, South Africa, and Mike Bendixen and Russell Abratt H. Wayne Huizenga School of Business and Entrepreneurship, Nova Southeastern University, Fort Lauderdale, Florida, USA Abstract Purpose – The purpose of this paper is to provide an understanding of the banking needs of urban informal poor consumers in South Africa. These consumers find it difficult to obtain access to banking products. Design/methodology/approach – A survey of consumers was undertaken in a large informal settlement outside Johannesburg. A qualitative exploratory pilot study was undertaken first to gain a better understanding of these consumers and to develop a research instrument. Second, a quantitative analysis was undertaken among 200 households. Findings – Banking products used by the sample are discussed as well as all their patronage motives. It was established that the majority of consumers did have a bank account and there was a significant association between having an account and various demographics such as income level, employment status and level of education. Research limitations/implications – Each informal settlement may have unique characteristics and therefore it may be difficult to generalize the findings. Practical implications – Banks will have to address the patronage factors of these consumers as they have very different needs when compared to middle and upper income customers. Specify strategies are recommended to bank management. Originality/value – No study has been done on the banking needs of this segment of the market and very little is known about the urban informal poor in general. This paper gives insight into how banks can play their part in uplifting the poor in societies where they make up large segments of the population. Keywords Urban communities, Poverty, Disadvantaged groups, Banking, South Africa, Social economics Paper type Research paper An executive summary for managers can be found at the end of this article. Introduction In developing nations such as South Africa, India and Indonesia, the vast majority of consumers are poor by international standards. One of the many challenges in these emerging markets is to determine how to uplift the poor. The South African Banking Council (2003) hopes to play a significant role in this, by ensuring that the banking industry improves access and services to banking facilities for this segment of the population. The problem is that many of the formal banks are not developing and adapting their products and services to meet the needs of the poor (Moore, 2000). Instead, the formal banks are continuing to market complex products and services designed for more affluent consumers whose market behaviour is markedly different from that of the poor. While some of the formal banks have begun to market directly to the poor, very little is known about the importance that poor people place on selected patronage factors in choosing bank products, or on the perceived usefulness of the various banking services that support the products. The purpose of this study is to identify, amongst the urban informal poor, the importance of selected patronage factors in choosing banking products, and to determine the perceived usefulness of the various banking services. Informal settlement (often referred to as squatter camps or shanty towns) are densely populated settlements comprised of members housed in self-constructed shelters under conditions of informal or traditional land tenure (Fraser and Manson, 2003). In South Africa, the urban informal settlement is driven by the legacy of Apartheid, shortages of government low-income housing and abject poverty. Despite the efforts of government to improve housing conditions, it is clear that informal settlements will remain part of the urban landscape in South Africa for many years to come (Ballantyne and Oelofse, 1999). Literature review Banking in South Africa South Africa has a sophisticated, well-developed banking industry that has historically provided banking products and The current issue and full text archive of this journal is available at www.emeraldinsight.com/0887-6045.htm Journal of Services Marketing 21/1 (2007) 52–63 q Emerald Group Publishing Limited [ISSN 0887-6045] [DOI 10.1108/08876040710726293] Received October 2004 Revised March 2005 Accepted April 2005 52