samaf medium term strategic framework 2010 – 2013 presentation to the portfolio committee on...

samaf Medium Term Strategic samaf Medium Term Strategic FrameworkFramework2010 – 20132010 – 2013

Presentation to the Presentation to the Portfolio Committee on Economic DevelopmentPortfolio Committee on Economic Development

07 September 201007 September 2010

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ContentsContents Mandate

Vision , Mission & Values

Products and Services

Alignment to EDD Institutional Drivers

Key priorities for 2010/11

Performance Targets

Risk Assessment

Budget

2010/11 Quarter 1 Performance

Challenges2

MandateMandateContribute to Government’s poverty reduction goals by acting as a catalyst for the development of an effective micro-finance sector through:

Support for the establishment of sustainable micro-finance institutions that can reach deeper and broader to the enterprising poor;

Facilitating the establishment of an enabling environment for effective financial intermediation and facilitation of working markets for the enterprising poor; and

Building a strong, effective and efficient Apex Fund.

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VisionVision

Active participation of enterprising poor in economic activities is robust and bears fruit;

Reduction of financial troughs for a better livelihood;

Sustainable Financial Intermediaries (FI’s);

Adoption of best practise models;

Competent employees;

Utilisation of systems in delivery of services; and

A financially sustainable samaf

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samaf envisions a country in which a network of sustainable micro-finance institutions

broadens and deepens access to affordable financial services by the enterprising poor.

This is achieved when:

MissionMissionProvide developmental financial and non-financial services to FI’s (MFI’s & FSC’s) through:

The effective mobilisation and wholesaling of capital for micro-finance institutions with proven potential;

The development of human capital in the economic environment through capacity building and institutional development;

Contribute to policy development with respect to micro-finance to inform and support samaf staff, its partners, and stakeholders; &

The development of valuable partnerships between business, Government and the community.

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ValuesValuesThe following values will underscore samaf’s behaviour as it strives towards the achievement of its mandate, vision and mission:

Integrity - Dealing with stakeholders in an honest and ethical manner;

Transparency - Ensuring compliance to best practice on the dissemination and sharing of information with all stakeholders and consult with them to ensure comprehensiveness and buy-in to samaf activities;

Professionalism - Adhere to specific defined norms and setting standards of workmanship, respect, and communication;

Accountability - Taking responsibility for the decisions and actions, including allocation of powers and duties; and

High Performance - Excellent performance and satisfied customers that guarantee long term sustainability of the South African Micro-Finance Apex Fund.

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Products and ServicesProducts and Services

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samaf offers three main products and services namely Financial Services,Technical Support and FSC Supervision.

Loans - samaf provides loans to a maximum of R10 million to its FI’s who in turn can provide loans to its clients up to a maximum of R10 000.

Capacity Building - the following are the capacity building interventions that samaf offer:

Capacity building Loan linked grant: MFI’s receive a maximum of 50% of the total loan amount approved whilst FSC’s receive a maximum of 170% of the loan approved.

R200 000 grant: This grant is not linked to the loan and is given to FSC’s that are still to be capacitated in terms of training and operational costs.

Technical support: samaf staff provide technical support such as the development of operational policy documents, training of FSC’s, etc.

FSC Supervision: samaf is mandated to regulate and supervise all FSC’s in South Africa in terms of Exemption Notice 887 of the Banks Act.

Alignment to EDD Institutional DriversAlignment to EDD Institutional DriversThe performance objectives are aligned to the following policy and institutional

drivers as defined by the Economic Development Department (EDD):

Co-operatives Review - Improved support for FI’s (Micro-finance

Institutions and Financial Services Co-operatives).

Spatial development - Extension of samaf offerings to remote and rural

areas with an appropriate provincial focus.

Youth employment - Creation of job opportunities for the youth.

Dashboard - Definition and implementation of an effective reporting

mechanism.

Research and policy - Ongoing research for service delivery

optimisation.

Red tape review - Review of turnaround times and bottlenecks.

Cost review - Reviewing and implementing measures to reduce costs.8

Key Priorities for 2010/11Key Priorities for 2010/11

Provision of financial support to FI’s totalling R36m for on-lending;

R23.4m for capacity & institutional building support for (Microfinance

Institutions (MFI’s) and Financial Serviced Co-operatives(FSC’s)

Increase threshold of on-lending from R10k to R50k

Technical support through samaf’s provincial offices & industry experts

Review of institutional processes & cost drivers

Identification of skills gaps & implementation of appropriate interventions

Building public confidence in the micro-finance sector through development

of appropriate reporting and prudential stds (i.e. minimum requirements); &

Lobbying for policy review & other support to enable growth of the sector.

Through this, samaf will work closely with the interest groups and key

stakeholders to develop an enabling policy and regulatory framework.

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Performance TargetsPerformance Targets

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KPA 2010/11 2011/12 2012/13

Increase in samaf Loan Book R36.0m R38.2m R40.6m

Increase in FI Savings Book R 4.3m R4.7m R5.2m

Capacity Building MFI R18.7m R23.0m R24.4m

Capacity Building FSC R 4.7m R5.7m R6.1m

Total No. of Borrowers 17,025 18,652 19,065

Total No. of Savers 11,900 8,055 10,000

MFIs Funded & Supported 14 10 8

FSCs Funded & Supported 26 17 16

Performance Targets - continuedPerformance Targets - continued

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Demographic SplitSplit per Loan Type


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Provincial Split – Loans (R’m)Provincial Split – No. of FI’s (MFI’s & FSC’s)


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Provincial Split – Savings (R’m)Provincial Split – Capacity Building (R’m)

4.4

3.8 3.8

3.43.1

2,0

1.4

1,0

0.5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

WC EC MP

GP LP FS

KZN

NW NC


Key strategic alliances – 2 in 2010/11 & 3 each in 2011/12 & 2012/13

Loan repayment rate to samaf – 50%, 60% & 70% over the three yrs

Tool to measure capacity building impact – investigate in 2010/11 &

implement over subsequent two yrs.

Review operational costing model – 70%, 80% & 100% over the three yrs

Portfolio @ risk – 45%, 42% & 40%, reducing marginally over the three

years

Bad debts recovered – 1%, 2% & 5%, increasing as capacity & systems

improve

Improving awareness – brochures in all languages & community radio

stations in 2010/11 & additionally utilising TV in next two years

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Performance Targets - continuedPerformance Targets - continuedImprove client satisfaction – 70%, 80% & 85%, increasing over three yrs

Retention of FI’s (MFI’s & FSC’s) – 50%, 60% & 80% over the three yrs

Reducing turnaround times for resolving client complaints from 5 to 2 days

by 2012/13

Review loan approval & disbursement process to improve turnaround

times

Reduce turnaround times for paying creditors from 30 to 15 days by third yr

Finalisation of review of critical skills requirement for samaf & 60%, 80% &

100% staff trained over the three yrs in partnership with strategic alliances

Internships & youth learner ship – 6, 8, 10 over the next three yrs

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Risk AssessmentRisk AssessmentRisk Rating Description Contingency Plans

Credit Risk High Inability of FI’s (MFI’s & FSC’s) to service their debt to samaf;Inability and unwillingness of end-user to service their loans with FI’s.

Implementation of the robust litigation and debt collection strategy as per sec 38 of the PFMA; Implementing affordability test as per NCA.

Strategy Implementation Risk

High Inability of samaf to implement their strategy & to meet the mandate.

Training development and performance management systems implementation.

Operational Risk High A risk emanating from ineffective operational systems; Inadequate monitoring and evaluation of the performance of FI’s.

Implementation of operational systems and business processes;Implementation of risk management systems and operational standardized policies.

Macro-Economic Risk

High A risk emanating from changes in the macroeconomic environment;Change of government policy.

Micro-finance research into economic environment ;Implement partnerships with Ministerial decision bodies.

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BudgetBudget

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R’000 2010/11 20011/12 2012/13Expenses

Compensation of employees 24,991 25,921 28,676Goods and services 18,885 19,447 20,081Losses from adjustments to fair value 978 880 1,219

Operational Expenses 44 854 46 248 49 976

Capacity Building Grants 23,383 28,700 30,500Loans to FI’s(MFI’s & FSC’s) 36,000 38,200 40,600

Total Funding to FI’s59,383 66,900 71,100

2010/11 Quarter 1 Performance2010/11 Quarter 1 Performance

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KPAAnnual Target

Q1Actual

Increase in samaf Loan Book R36.0m R2.0m

Increase in FI Savings Book R 4.3m R0.6m

Capacity Building MFI R18.7m R1.2m

Capacity Building FSC R 4.7m R0.1m

Total No. of Borrower 17,025 11,434

Total No. of Savers 11,900 118

MFIs Supported & Funded 14 2

FSCs Supported & Funded 26 4


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Demographic Split


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Measure Target Actual Reason for VarianceApproval of revised thresholds (R10k to R50K)

100% n/aIdentified during July revision of strategy.# of strategic alliances 2 n/a

% FI Loan Repayment rate to samaf

50% 88% Exceeded

Tool to measure capacity building impact

100% 50%Tool developed but not yet implemented.

Review operational costing model 70% 0%Identified during July revision of strategy.

Portfolio at risk 45% 12% Currently exceeded

% of money recovered from bad debt written off.

1% 0%No bad debt recovered during the quarter.

# of Marketing interventionsPrint brochures in all languages, community radio stations

0

Work in progress. Printing of Brochures to be finalised in Q2. One article published in Pan African Parliament Magazine.

Client satisfaction index 70% 0 To be conducted

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Measure Target Actual Reason for Variance% FI Retention 50% 80% AchievedTurnaround time for resolving client complaints.

5 days 1 day Achieved

% completion for Loan Process review project 100% 0% Identified during July 2010 revision of strategy. To be finalised in Sep 2010.

Turnaround time (in days) taken to approve loan application.

91 125 Difficulties in achieving the turnaround times due to quality of funding proposals

Turnaround time (in days) in paying creditors 30 20 Achieved – Couple of exceptions due to queries.

% completion of identification of the top critical skills throughout samaf

100% 60% Document will be finalised end of Q2.

Develop/refine tool for future workforce needs and capability requirements

100% 40% To be finalised by Q3

% of employees trained on critical skills 60% 13% Staff attended certificate on microfinance.

% completion of the competence gap in FI’s (MFI’s & FSC’s);

65% 40% Intervention still to be confirmed with FI’s

% completion of the tools to close the gaps 70% 0 Analysis in progress


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2010/11 Quarter 1 Performance2010/11 Quarter 1 PerformanceMeasure Target Actual Reason for Variance

# of strategic partners Identified to drive the capacitation of the industry skills base

2 4 Achieved. DGRV, Bank SETA, University of Pretoria & WITS

Internship - # of Internships implemented across samaf

4 0

Identified during July 2010 review of strategy

Learnership - # of youth on learnership programme

2 0

ChallengesChallenges

Appropriate skills, leadership & accountability at senior levels

within samaf

Lack of skills within the micro-finance sector

Sustainability of FI’s (MFI’s & FSC’s)

Turnaround times

Cumbersome systems & processes

Effective reporting & performance management systems

Profit margin for start-ups is small.

Deposit taking insurance – samaf FSC’s not covered in terms

of the Bank Insurance Act. 23

Thank You

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