Post on 30-Dec-2015
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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
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
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 world’s 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
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
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 FINCA’s clients are women
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
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
Two Types of Progammes
Self-Employment Partnerships (SEP)
Serve the small woman-owned businessClients 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 solvingMinimum loan is R750 ($140.00 Cdn.)Maximum loan is R 5000.00 ($950.00 Cdn.)
Two Types of Programmes…cont’d
Individual Loans
FINCA also offers men and women collateralized loans for more developed businessesClients include the owners of tuck shops, small scale production, shoe manufacturing and service providing businessesEach potential client completes a business plan with a FINCA loan officer. The decision to disburse is based upon the current condition of a client’s business and the ability and willingness to repay the loanLoans start from R5000.00 ($950.00 Cdn.)
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