This dissertation examines issues related to KwaZulu-Natal's "unbanked" and poor populations and details efforts by Ithala Limited, a government-backed development finance institution (DFI) acting as a subsidiary of the more broad-based Ithala Development Finance Corporation, to make financial products and services available to these constituencies. Specifically, it is suggested that while Ithala Limited has been largely successful in providing savings accounts, home loans and business support finance to many of KwaZulu-Natal's "unbanked" and poor citizens, the organization is now facing political and commercial pressures which call into question its future as a "pro-poor" "banking" institution. In particular, this study identifies Ithala Limited as being unable to gain formal licensing as a banking agency as the result of anxieties felt by state institutions like the South African Reserve Bank (SARB) over the potential impact that Ithala Limited's sub-prime lending activities may have on macroeconomic stability. As a result of these worries, the SARB (along with the KwaZulu-Natal provincial government) is pressuring Ithala Limited to scale-back the extent of its "banking" mandate. A second pressure is identified by this study as emanating from South Africa's commercial banks, whose initial reluctance to serve impoverished populations appears to be fading as more cost-effective ways are found to extend banking products and services to the poor. For Ithala Limited, an advent of commercial sector interest in serving the "unbanked" and the poor raises key pressures revolving around the extent to which the firm, as a parastatal body, should seek to compete with the private sector when it comes to assisting these populations. This study poses two central questions: 1) how should Ithala Limited respond to these pressures? and 2) regardless of how it responds, how should the organization shape its corporate priorities to ensure that it remains an effective "development tool" in the future? This dissertation then argues that while the pressures facing Ithala Limited from both political and commercial forces are not without justification, the organization continues to possess a number of unique qualities that rationalize its continued presence in serving the low-income and "unbanked" markets in KwaZulu-Natal. As such, it is the position of this dissertation that Ithala Limited should try to resist these pressures as much as possible. At the same time, it will be demonstrated that for Ithala Limited to continue achieving success in assisting these aforementioned constituencies, it must pursue a three-pronged approach to organizational reform that prioritizes some degree of privatization to attract new sources of capital and to ease government fears about the existence of a "state-owned" bank for the poor. Further reforms, this study reveals, are needed in the areas of technological utilization and "homegrown" research capacity, both of which must be expanded and improved upon in order to allow Ithala Limited to reduce its operating costs, introduce a more varied range of products and keep up-to-date with changes in South African banking trends. / Thesis (M.A.)-University of KwaZulu-Natal, Durban, 2008.

This dissertation analyses the role of financial services in an attempt to understand how they might reduce the vulnerability to income risk for women street traders in Durban, South Africa. The street traders are exposed to income risks such as unpredictable markets, high levels of crime and lack of possibilities for business development. The stated hypothesis for this dissertation is that 'good' financial services may help poor individuals and households to better handle income risks and thereby lower the vulnerability to risks and reduce poverty. The access to financial services for the street traders in South Africa is rather limited and commercial banks are only willing to facilitate clients that have collaterals with an economic value. There are thus alternative financial institutions, such as microfinance organisations, that use social collateral like, for example, group-lending and frequent repayment schemes. This dissertation will discuss the use and impact of fmancial services on poverty reduction with a particular focus on a microfinance organisation and savings. The dissertation will consist of a literature review, a theoretical framework and an analysis of the findings from a case study. The literature review discusses the relation between risks, vulnerability, poverty and financial services in order to provide an introduction to the problem behind the stated hypothesis. The theoretical framework describes the cost of an imperfect market, why formal financial institutions fail the poor, solutions to the problem used by informal and microfinance institutions and the impact financial services have on poverty. The case study is based on a qualitative method through focus group discussions and individual in-depth interviews with clients in a microfinance organisation. To analyse the differences in saving behaviour and business related issues, the clients are divided into two groups with regards to how long they have been using financial services. One group consists of 'old' clients that have access and use the credit and deposit facilities accessible, and one group of 'new' clients that have just started and still have no access to the services. The findings show that 'old' clients have a higher level of income and more advanced businesses according to skill/capital intensity. Risk related to income and expenditures that the street traders mentioned are sensitive to the state of the economy, unbeneficial stock, weather conditions, seasonal trends, business agreements, crime and trade permits. Regarding savings, the street traders used a wide range of saving alternatives such as insurance schemes, bank accounts, money collectors, rotating credit and saving clubs and cash savings. There were thus a lack of 'good' saving opportunities and even the deposit schemes offered by the microfinance organisation was not used due to lack oftrust and accessibility. Both the 'old' and the 'new' clients were thus aware ofthe need of savings in order to protect themselves for future income and expenditure risks. The main conclusion is that the use of financial services through the microfinance organisation and other institutions may have helped the 'old' clients to develop their businesses and reach a higher income level. There is thus a lack of 'good' financial options for the street traders and their position is still very vulnerable. / Thesis (M.Dev. Studies)-University of Natal,Durban, 2003.