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THE STATE OF MICROENTERPRISE FINANCE IN SOUTH AFRICA 2011

THE STATE OF MICROENTERPRISE FINANCE IN SOUTH AFRICA 2011. TOPICS. Definitions Market Size and Characteristics Number and Type of Suppliers Challenges in SA Challenges for Retail DFIs Recommended Role for Government. Definitions. Loans from R1 000 to R80 000

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THE STATE OF MICROENTERPRISE FINANCE IN SOUTH AFRICA 2011

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  1. THE STATE OF MICROENTERPRISE FINANCE IN SOUTH AFRICA 2011

  2. TOPICS Definitions Market Size and Characteristics Number and Type of Suppliers Challenges in SA Challenges for Retail DFIs Recommended Role for Government

  3. Definitions Loans from R1 000 to R80 000 Loans primarily 6 to 12 months; a portion up to 36 months Income from microenterprise, the primary source of income in the HH Utilization of loan not always in the business; 50% goes to consumption smoothing

  4. Alexandria near Johannesburg

  5. Market Size and CharacteristicsFinScope Small Business Survey, 2010 Number of Businesses per Cluster

  6. Market Size and Characteristics Business Owners per Province %

  7. Market Size and Characteristics Demographic Profile per Cluster %

  8. Market Size and Characteristics Business Location per Cluster %

  9. Spaza shop in Alexandria

  10. Suppliers of Microenterprise Loans Not-for-profit Microenterprise Lenders Primary Banks Financial Cooperatives Development Finance Institutions

  11. Survivalist Market Served 2009130 000 Active Loans

  12. Mid-Level Market Served 201115 000 Active Loans

  13. WIZZIT Loan Officer

  14. Challenges in South Africa “the graveyard of micro(enterprise)finance” Market Issues Institutional Issues Environmental Issues

  15. Challenges in South Africa Market Issues Low density of microenterprises Tendency towards non-compliance and non-payment Competition from formal businesses in the trading sector More opportunities in services, but these require higher level of skill

  16. Challenges in South Africa Institutional Issues • Shortage of skilled staff and managers • Very high costs; highest “salary burden” ratio in the world • Shortage of TA from outside SA; reinventing the wheel • Donors and investors not providing sufficient patient capital • Finding appropriate functional and scalable financial and loan tracking systems

  17. Comparative Salary Burden Ratios = ______Average Staff Salary ___Average Portfolio per Staff Member

  18. Challenges in South Africa Environmental Issues SA Strengths Communications and road infrastructure Credit Bureau Sector National Credit Act SA Challenges High cost security requirements Judicial bottlenecks for taking of collateral

  19. Pre-School, Alexandria

  20. Challenges for Retail DFIs Sense of entitlement; why repay? Confusion when some services are “free” Political reluctance to be tough on late payers Vulnerable to political interference on allocation of loans Personnel policies constrained Decision-making less flexible Compelled to serve wide geographic area Compelled to serve higher risk markets

  21. Look carefully at Past Experience Steven Ngobeni, NYDA Mail & Guardian, March 2011 70% of beneficiaries defaulted An improvement over the previous figure of 89%

  22. Laundry, Alexandria

  23. Recommended Role for Government Continue to support private credit suppliers through Apex organizations On-lending finance and capacity building grants Recognize necessary role for grants Build expertise of Apex and ministry staff; CGAP funder workshops Muhammed Yunus “microfinance is not for amateurs” Continued support to CBDA Consider Public Private Partnerships – IMPORTANT!

  24. Recommended Role for Government Continue to support enabling environment Collateral environment; magistrates courts Debt counsellors Encourage foreign donors and investors Encourage foreign TA providers and networks Post bank deposit service Dedicated Banks Bill of 2004 Support to branchless banking Develop overarching policy on financial inclusion

  25. THE STATE OF MICROENTERPRISE FINANCE IN SOUTH AFRICA 2011 THANK YOU

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