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 Programmes…contd 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

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