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  • CENTRE FOR INCLUSIVE BANKING IN AFRICA

    The Microfinance Review 2013

    From Microfinance to Financial Inclusion

    A review of the South African microfinance sector

    Trends, successes, challenges, and policy issues

    i

  • TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES LIST OF ACRONYMS ACKNOWLEDGEMENTS

    1. Definitions, report methodology and organisation ........................................................................ 1

    2. Executive Summary ......................................................................................................................... 6

    3. Context, the world we live in and which impacts on inclusion ..................................................... 20 3.1 ECONOMIC CONTEXT ................................................................................................................................ 20 3.2 LEGISLATIVE ENVIRONMENT ....................................................................................................................... 25 3.3 CREDIT BUREAU SECTOR ............................................................................................................................ 33 3.4 DEBT COUNSELLING .................................................................................................................................. 39 3.5 BRANCHLESS BANKING .............................................................................................................................. 41 3.6 WHOLESALE DEVELOPMENT FINANCE INSTITUTIONS (DFIS) ............................................................................. 46

    4. Market Demand, understanding the market ................................................................................ 55 4.1 CONSUMER DEMOGRAPHICS ....................................................................................................................... 55 4.2 DEPOSIT PRODUCT USAGE .......................................................................................................................... 60 4.3 CREDIT PRODUCT USAGE ............................................................................................................................ 65 4.3 INSURANCE PRODUCT USAGE ...................................................................................................................... 72 4.5 REMITTANCE PRODUCT USAGE .................................................................................................................... 74 4.6 SMALL BUSINESS MARKET .......................................................................................................................... 77

    5. Market Supply, the reality of providers ........................................................................................ 83 5.1 MICROENTERPRISE LENDERS ...................................................................................................................... 83 5.2 CO-OPERATIVE FINANCIAL INSTITUTIONS (CFIS) ............................................................................................. 89 5.3 SALARY-BASED MICROLENDERS ................................................................................................................... 98 5.4 ALTERNATIVE BANKS ............................................................................................................................... 100 5.5 PRIMARY BANKS .................................................................................................................................... 102 5.6 AFFORDABLE HOUSING FINANCE ............................................................................................................... 111 5.7 RETAILERS............................................................................................................................................. 116

    6. Special Focus Areas ..................................................................................................................... 118 6.1 FINANCIAL SERVICES FOR LOW-INCOME FARMERS AND RURAL COMMUNITIES ..................................................... 118 6.2 SOCIAL GRANTS AND FINANCIAL INCLUSION: ARE WE GOING BACKWARDS? ........................................................ 124 6.3 REMITTANCES ........................................................................................................................................ 128 6.4 SAVEACT .............................................................................................................................................. 130

    7. References .................................................................................................................................. 133

    ii

  • LIST OF TABLES Table 1.1: The G20 Financial Inclusion Indicators ................................................................................... 3 Table 2.1: Banked population rates in Africa .......................................................................................... 9 Table 3.1: MPI figures for South Africa relative to selected countries ................................................. 22 Table 3.2: The specific intervention cases considered from South Africa ............................................ 27 Table 3.3: No. of NCR Registered Institutions ....................................................................................... 28 Table 3.4: Credit standing of consumers .............................................................................................. 34 Table 3.5: Credit standing of accounts ................................................................................................. 35 Table 3.6: Credit bureau enquiry trends ............................................................................................... 35 Table 3.7: All enquiries - distribution according to sectors .................................................................. 36 Table 3.8: Credit reports issued to consumers ..................................................................................... 36 Table 3.9: Credit Information Disputes lodges by consumers .............................................................. 37 Table 3.10: 2006 Credit Information Amnesty vs. 2013 Proposed Amnesty ........................................ 38 Table 3.11: Number of applications for debt counselling from March 2008 to February 2012 ........... 40 Table 3.12: Fees and costs of debt counselling .................................................................................... 40 Table 3.13: Publicly owned DFIs ........................................................................................................... 47 Table 3.14: Wholesale DFIs Supporting the Microfinance Sector ........................................................ 47 Table 3.15: Changing landscape of wholesale DFIs, 2009 2013/4 ..................................................... 48 Table 3.16: Product offerings and services by NHFC ............................................................................ 49 Table 3.17: Developmental impact of NHFC ......................................................................................... 49 Table 3.18: Key Financial Indicators of NHFC at December 2012 ......................................................... 49 Table 3.19: Performance Indictors on RHLF ......................................................................................... 50 Table 3.20: Product offerings and services by RHLF ............................................................................. 51 Table 3.21: Rural Housing Loan Fund development impact ................................................................. 51 Table 3.22: Compressed Financial Statement of RHLF ......................................................................... 52 Table 3.23: Key performance targets Small Enterprise Finance Agency (sefa) .................................... 52 Table 3.24: sefa Performance against Targets, 2013 ............................................................................ 53 Table 3.25: MAFISA financial intermediaries ........................................................................................ 54 Table 3.26: Disbursement Trends Loans ............................................................................................... 54 Table 4.1: A snapshot of LSM 1-6.......................................................................................................... 55 Table 4.2: Population Distribution by LSM ........................................................................................... 56 Table 4.3: Education Level by LSM % .................................................................................................... 57 Table 4.4: Distribution of social grants ................................................................................................. 58 Table 4.5: Types of working contracts by LSM% ................................................................................... 59 Table 4.6: Income Ranges by LSM% ...................................................................................................... 59 Table 4.7: Banking status by LSM.......................................................................................................... 59 Table 4.8: Bank account ownership by LSM ......................................................................................... 60 Table 4.9: Selected South African Savings Determinant Indicators ...................................................... 61 Table 4.10: Savings Mechanisms 2010-2012 ........................................................................................ 61 Table 4.11: Type and Estimated Value Contribution of Stokvels .......................................................... 62 Table 4.12: Savings according to LSM (%) ........

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