Micro Credit in South Africa - PowerPoint PPT Presentation


Title: Micro Credit in South Africa


1
Micro Credit in South Africa
2
What is Micro-Credit?
  • Micro credit or micro finance is the extension of
    small loans to entrepreneurs too poor to qualify
    for traditional bank loans
  • Enables those without access to lending
    institutions, to borrow at bank rates and start
    small businesses
  • Makes small loans accessible to poor
    entrepreneurs with no collateral

3
Who Are the Clients of Micro Credit?
  • The typical microfinance clients are low-income
    persons that do not have access to formal
    financial institutions
  • Microfinance clients are typically self-employed,
    often household-based entrepreneurs
  • In rural areas, they are usually small farmers
    and others who are engaged in small
    income-generating activities such as food
    processing and petty trade
  • In urban areas, microfinance activities are more
    diverse and include shopkeepers, service
    providers, street vendors, etc

4
Why Target Women?
  • 1.2 billion people are living on less than a
    dollar a day
  • Women are often responsible for the upbringing of
    the worlds children and the poverty of the women
    generally results in the physical and social
    underdevelopment of their children
  • Experience shows that women are a good credit
    risk, and that women invest their income toward
    the well being of their families. At the same
    time, women themselves benefit from the higher
    social status they achieve within the home when
    they are able to provide income

5
Microfinance Recipients
  • Individuals. Some microfinance programs only lend
    to individuals
  • Start-up or existing businesses. Some programs
    only lend to start-up businesses, others only
    lend to preexisting businesses. Each program
    differs according to the need and the services
    available
  • Small, solidarity groups (peer lending).
    Generally these programs require that individuals
    form groups (usually consisting of 5 or more
    unrelated borrowers) in which each member acts as
    collateral for one another. These groups of
    borrowers decrease the costs of operating the
    program as they increase the group members'
    support leading to higher repayment rates and
    sanction the behavior of other group members

6
Foundation for International Community Assistance
(FINCA) South Africa
7
Who is FINCA South Africa?
  • FINCA South Africa is a micro credit organization
  • An affiliate of FINCA International which
    operates in 22 countries and serves over 215,000
    small business entrepreneurs
  • Serves Kwa-Zulu Natal and bordering areas with
    head office in Durban
  • 94 of FINCAs clients are women

8
Mission Statement
  • To improve the quality of life for
    economically disadvantaged people in South Africa
    through the provision of financial services to
    low-income entrepreneurs

9
How FINCA Helps Its Clients
  • Teach responsible borrowing
  • Encourage savings
  • Gain economic independence
  • Increase value of businesses and profitability
  • Solidarity groups promote self-esteem and
    self-reliance

10
Two Types of Progammes
  • Self-Employment Partnerships (SEP)
  • Serve the small woman-owned business
  • Clients include hawkers, crafters, street
    vendors, seamstresses, etc.
  • Does not require physical collateral instead a
    group guarantee
  • Clients have weekly meetings this increases
    solidarity , builds trust, increases self-esteem
    and facilitates group problem solving
  • Minimum loan is R750 (140.00 Cdn.)
  • Maximum loan is R 5000.00 (950.00 Cdn.)

11
Two Types of Programmescontd
  • Individual Loans
  • FINCA also offers men and women collateralized
    loans for more developed businesses
  • Clients include the owners of tuck shops, small
    scale production, shoe manufacturing and service
    providing businesses
  • Each potential client completes a business plan
    with a FINCA loan officer. The decision to
    disburse is based upon the current condition of a
    clients business and the ability and willingness
    to repay the loan
  • Loans start from R5000.00 (950.00 Cdn.)

12
Problems with Credit in South Africa
  • Credit -credit unions and/or micro credit
    organizations have bad reputations in South
    Africa because of the history credit has played
    in the country
  • Stockveld was a tradition whereby people
    congregated and exchanged goods for money
  • This tradition created the misconception of
    credit as people do not always receive their
    money when they exchanged their goods
  • Pre apartheid Governments only provided credit to
    the privileged upper races

13
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Micro Credit in South Africa

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Title: Micro Credit Finance In South Africa Author: Silvia Gonzalez Last modified by: Elizabeth Kovacs Created Date: 4/16/2003 6:43:21 PM Document presentation format – PowerPoint PPT presentation

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Title: Micro Credit in South Africa


1
Micro Credit in South Africa
2
What is Micro-Credit?
  • Micro credit or micro finance is the extension of
    small loans to entrepreneurs too poor to qualify
    for traditional bank loans
  • Enables those without access to lending
    institutions, to borrow at bank rates and start
    small businesses
  • Makes small loans accessible to poor
    entrepreneurs with no collateral

3
Who Are the Clients of Micro Credit?
  • The typical microfinance clients are low-income
    persons that do not have access to formal
    financial institutions
  • Microfinance clients are typically self-employed,
    often household-based entrepreneurs
  • In rural areas, they are usually small farmers
    and others who are engaged in small
    income-generating activities such as food
    processing and petty trade
  • In urban areas, microfinance activities are more
    diverse and include shopkeepers, service
    providers, street vendors, etc

4
Why Target Women?
  • 1.2 billion people are living on less than a
    dollar a day
  • Women are often responsible for the upbringing of
    the worlds children and the poverty of the women
    generally results in the physical and social
    underdevelopment of their children
  • Experience shows that women are a good credit
    risk, and that women invest their income toward
    the well being of their families. At the same
    time, women themselves benefit from the higher
    social status they achieve within the home when
    they are able to provide income

5
Microfinance Recipients
  • Individuals. Some microfinance programs only lend
    to individuals
  • Start-up or existing businesses. Some programs
    only lend to start-up businesses, others only
    lend to preexisting businesses. Each program
    differs according to the need and the services
    available
  • Small, solidarity groups (peer lending).
    Generally these programs require that individuals
    form groups (usually consisting of 5 or more
    unrelated borrowers) in which each member acts as
    collateral for one another. These groups of
    borrowers decrease the costs of operating the
    program as they increase the group members'
    support leading to higher repayment rates and
    sanction the behavior of other group members

6
Foundation for International Community Assistance
(FINCA) South Africa
7
Who is FINCA South Africa?
  • FINCA South Africa is a micro credit organization
  • An affiliate of FINCA International which
    operates in 22 countries and serves over 215,000
    small business entrepreneurs
  • Serves Kwa-Zulu Natal and bordering areas with
    head office in Durban
  • 94 of FINCAs clients are women

8
Mission Statement
  • To improve the quality of life for
    economically disadvantaged people in South Africa
    through the provision of financial services to
    low-income entrepreneurs

9
How FINCA Helps Its Clients
  • Teach responsible borrowing
  • Encourage savings
  • Gain economic independence
  • Increase value of businesses and profitability
  • Solidarity groups promote self-esteem and
    self-reliance

10
Two Types of Progammes
  • Self-Employment Partnerships (SEP)
  • Serve the small woman-owned business
  • Clients include hawkers, crafters, street
    vendors, seamstresses, etc.
  • Does not require physical collateral instead a
    group guarantee
  • Clients have weekly meetings this increases
    solidarity , builds trust, increases self-esteem
    and facilitates group problem solving
  • Minimum loan is R750 (140.00 Cdn.)
  • Maximum loan is R 5000.00 (950.00 Cdn.)

11
Two Types of Programmescontd
  • Individual Loans
  • FINCA also offers men and women collateralized
    loans for more developed businesses
  • Clients include the owners of tuck shops, small
    scale production, shoe manufacturing and service
    providing businesses
  • Each potential client completes a business plan
    with a FINCA loan officer. The decision to
    disburse is based upon the current condition of a
    clients business and the ability and willingness
    to repay the loan
  • Loans start from R5000.00 (950.00 Cdn.)

12
Problems with Credit in South Africa
  • Credit -credit unions and/or micro credit
    organizations have bad reputations in South
    Africa because of the history credit has played
    in the country
  • Stockveld was a tradition whereby people
    congregated and exchanged goods for money
  • This tradition created the misconception of
    credit as people do not always receive their
    money when they exchanged their goods
  • Pre apartheid Governments only provided credit to
    the privileged upper races

13
Thank You
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