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Outline
History
Present
Future
Short history
Four phases
Before 1992 from struggle to financial services
1992 to 1999 growth after legislative changes 1999 to 2005 era of growth continues in a more regulated environment (MFRC) 2006 - onwards
Until 1992
NGO dominated market Entrepreneurial focus Origins in struggle and non-financial NGOs Difficult to make the change USAID spent $20m between 1988 - 1999on mostly NGOs Decline of the NGOs, but exception(s) Decline of the parastatal institutions Financial exclusion of majority, role of apartheid, distortions due to Usury Act
1992 to 1999
Key NGOs collapse Exemption under R6000
1999 to 2005
Khula failed in its mandate, looses intermediaries APEX concept, design and ..
20
15
10
Assessing MFRC
Formalize microlending:
~2200 registered, % unregistered ? Black MLs, but informal township MLs (?)
Consumer protection:
Help for borrowers, complaints & enforcement Progress on disclosure & reckless lending (?)
Information, understanding:
Central role in sectoral data & analysis Efforts to inform, educate public (?)
Pro-active stance: enforcement and beyond Institutional change: NLR, legal/judicial issues, National Credit Act Influencing policy through research: competition, housing, indebtedness
2006
MFRC ends
NCR starts
Challenges
Expansion of products, expanded options SMME finance attacking the self employed market
Regulatory environment - heavy burden of red tape
Registry of security interests Explicitly target productive uses of microfinance Transformation of NGO MFIs
African examples
National Microfinance Bank Tanzania Amhara Credit and Savings Institution Ethiopia Banque du Caire Egypt K-Rep Kenya Equity Bank Kenya CERUDEB Uganda Novo Banco - Mozambique Novo Banco - Angola
Other countries
BRI Unit Desa - Indonesia Banco do Nordeste Brazil Peoples Bank of Sri Lanka Banrural Guatemala Bank Pertanian Malasia Agricultural Development
NCR
Other rules
Harmonisation of policy and legislation? Main challenge enforcement?
Challenge Information
Need for even better data and information
Better credit scoring and pricing models
Having better information on individuals, households and firms applying for / using credit for policy development Training and capacity building
Major need, no recognition, not willing to pay
Consumer education
Need for improved outreach Focus on lower income strata
Table 9:
Comparative Table: Interest Charges by Institutions in 2000 and 2003 (Random Institutions) Cash Lenders 2000 2003 Term APR Institutions Loan amount Term APR
Institutions
Loan amount
Cash lender 2
Cash lender 3 Cash lender 4 Cash lender 5 Cash lender 6
R100-R500
R500 R500 R500 R500
7-25 days
30 days 25-30 days 25-30 days 25-30 days
540-1040%
360% 360-450% 640-780% 540-1040%
Bank 6
Micro-lender 1 Micro-lender 2 Micro-lender 9 Micro-lender 3 Micro-lender 4
R100
R100 R100 R100 R100 R100
1 month
1 month 1 month 1 month 1 month 1 month
228%
264% 336% 360% 360% 360%
Micro-lender 1
MFRC TCOC 13 lenders 2003 R750 30 days 60-360% Micro-lender 5 Bank 6 Micro-lender 2 Micro-lender 6
R500
R500 R1,000 R1,000 R1,000
1 month
1 month 1 month 1 month 1 month
259.2%
360% 222% 336% 360%
Institutions
Term lender 3 Cash lender 8 Term lender 2 Cash lender 9
Loan amount
>R2,000 <R10,000 <R9,000 <R6,000
APR (%)
45-88 242 57 153
Institutions
Bank 5 Micro-lender 8 Bank 1 Bank 4
Term (months) 12 12 12 12
APR (%)
83 155 98 147
Cash lender 7
Term lender 1 MFRC TCOC 23 lenders 21 lenders 27 lenders 7 lenders
R1,500-R3,000
R2,000-R6,000 2003 R5000 R8000 R3000 R2000
3-6
6-12
287
78
Micro-lender 7
Bank 2
R2,000
R5,000
9
12
209
112
12 24 12 6