Thesis (MDF)--Stellenbosch University, 2008. / ENGLISH ABSTRACT: High interest rates on credit products in South Africa are not unusual. This would be beneficial to the South African consumers if the cost of incurring these credit products was lower than the benefit derived from incurring them .This is unfortunately not the case to the majority of the South African population. The unlikelihood of this situation is a direct result of the lack of access to appropriate savings and insurance products to a large number of South Africans. Most South Africans use credit, in the form of microloans to augment their consumption patterns. The majority of South Africans do not have a culture of saving; therefore they use credit as a substitute for the lack of savings when consumption patterns exceed income. Using credit as a substitute for the lack of savings becomes extremely costly for low income earners. The result is a perpetual dependence on credit, lack of accumulation of wealth and a lack of improvement in their standard of living. The perpetual dependence on credit has brought about unscrupulous lenders who take advantage of the low income earners dependency on credit for their daily existence. It is due to such exploitations that the South African government through its Department of Trade and Industry (DTI) intervened to bring normality in the South African credit market. This intervention was done through the promulgation of the National Credit Act (NCA), Act No.34 of 2005. The purpose of this study is to focus on a sub set of the credit providers in South Africa known as housing microfinance (HMF) lenders. The study explores the impact of the National Credit Act in the South African credit industry. The Act’s intentions are elaborated and the reality of the implementation of the Act on the drivers of profitability for the housing microfinance institutions is measured. The finding is that housing microfinance institutions have to restructure their business processes in order to be profitable and sustainable in the ambit of the National Credit Act. / AFRIKAANSE OPSOMMING: Vir menige finansiële produkte in Suid-Afrika is rentekoerse wat wissel tussen 80 en 150 persent is nie ongewoon nie. In ekonomiese terme kan verbruikers slegs voordeel trek uit hierdie hoë rentekoerse as die koste om hierdie krediet te verkry laer is as die voordeel wat voortspruit uit die aangaan van die koste. Hierdie situasie is hoogs onwaarskynlik in die oorgrote meerderheid van gevalle in Suid-Afrika. Die onwaarskynlikheid van hierdie situasie is die direkte gevolg van die gebrek aan toegang tot toepaslike spaar- en versekeringsprodukte vir ‘n groot aantal Suid-Afrikaners. Die meeste Suid-Afrikaners gebruik krediet (naamlik mikrolenings) om hulle verbruikerspatrone aan te vul. Die gebruik van krediet as ‘n plaasvervanger vir spaargeld word uitermate duur vir die lae-inkomste verdiener. Die gevolg is ‘n ewigdurende afhanklikheid van krediet, geen akkumulasie van welvaart nie en ‘n gebrek aan verbetering van lewenstandaard. Die ewigdurende afhanklikheid van krediet het gewetenlose uitleners geskep wat die lae-inkomste verdieners uitbuit wat afhanklik is van krediet vir hul daaglikse bestaan. Dit is as gevolg van hierdie tipe uitbuiting dat die Suid-Afrikaanse regering deur sy Departement van Handel en Nywerheid tussenbeide getree het om normaliteit te bring in die Suid-Afrikaanse kredietmark. Hierdie intervensie is gedoen deur die uitvaardiging van die Nasionale Kredietwet, Wet No. 34 van 2005. Die doel van hierdie studie is om te fokus op ‘n onderdeel van die kredietverskaffers in Suid-Afrika bekend as die behuising-mikrofinansiering-uitleners. Die studie ondersoek die impak van die Nasionale Kredietwet in die Suid-Afrikaanse kredietindustrie. Die Wet se oogmerke word uiteengesit en die realiteit van die implementering van die Wet op die drywers van winsgewendheid vir die behuising-mikrofinansiering-instansies word gemeet. Die bevinding is dat behuising-mikrofinansiering-instansies hulle besigheidsprosesse moet herstruktureer ten einde meer winsgewend en volhoubaar te wees binne die strekking van die Nasionale Kredietwet.

Thesis (MBA)--Stellenbosch University, 2012. / The efforts of government in creating jobs and eradicating poverty in developing countries have received major attention among policy makers and operators of microfinance in the last one decade. One of such efforts is the establishment of a microfinance program known as South Africa Microfinance Apex fund (samaf) by South African government. Samaf was established in 2006 with the aims and objective to provide micro loan and credit to poor people living in peri-uban and rural areas of South Africa. This was brought about as a result of a gap created by major financial institutions that are neither available nor operating in such rural and remote areas. This research attempts to explore the effectiveness of samaf on job creation and poverty reduction as mandated by its aims and objective. The study was a case study, and data analysis mainly used descriptive statistics and inferential statistics to analyze the quantitative data that was collected in the research field. Findings from the study reveal that samaf was effective in terms of number of jobs creation. Also, it was found that there was an improvement in the life styles of beneficiaries than before they took samaf loan. However, samaf itself do have its shortcoming in term of quick delivery of funds to the MFIs. The study further discovered that, majority of samaf MFIs are not willing to expand their operations into informal settlement areas because of two reasons. First, majority of people living in such areas are considered vulnerable because due to the possibility non repayment of loans as they live in abject poverty. Secondly, majority do not have a fixed or permanent address which makes it difficult for MFIs to trace them. Based on the observation above, samaf will need a guiding and better strategy in terms of its delivery as there is none currently. This is necessary if it plans to achieve its aims and objectives and delivers on its mandate.

Thesis (MComm)--Stellenbosch University, 2005. / ENGLISH ABSTRACT: South Africans earning less than Rl 440 per month (18 million adults) and less than R2 880 per month (29 million adults) are regarded as poor and relatively poor respectively. Of the relatively poor, 78% are unbanked, i.e. do not have access to a formal bank account, while 86% of the poor are unbanked. These figures show clearly that commercial banks do not meet the financial needs of many people, especially the poor for savings, credit, transmission and insurance services. Therefore the importance of those institutions that do not form part of the formal financial sector and provide micro savings and micro credit services, generally referred to as micro finance, to the poor at the local level on a sustainable basis. The objective of this research is twofold. Firstly, a review of the literature on micro finance in general to establish the financial needs of the poor, the constraints formal financial institutions face in providing micro financial services and to identify best practice regarding the provision of financial services to the poor in order to be in the position to form an opinion on institutional success. Secondly, to analyse a specific South African micro finance initiative, Financial Services Cooperatives (FSCs), to identify how FSCs relate to the international best practice and to establish whether they are successful in addressing the financial needs of the poor. A FSC is a financial institution through which micro finance services (savings, credit, transmission and insurance) are extended to unbanked households in a rural village. It utilises a community's rules, customs, relationships, knowledge, solidarity and resources combined with formal financial methods and concepts. The FSC is initiated, owned, financed and managed by the villagers themselves. FSCs are registered cooperatives under the Cooperative Act of 1981 and may accept deposits from their members in terms of an exemption from the Bank Act of 1990. Currently, FSCs experience problems in providing credit, transmission and insurance services, preventing them from intermediating between borrowers and savers. After reviewing the above-mentioned international best practice the conclusion reached with regard to FSCs includes the following: FSCs only provide savings services and therefore do not intermediate between borrowers and savers as required for a financial institution. This in tum prevents them from being sustainable. FSCs' failure can be ascribed to the restrictive legislation, unsuccessful regulation and supervision. New legislation is currently under review that will change the landscape for micro finance and specifically for FSCs. / AFRIKAANSE OPSOMMING: Suid-Afrikaners wat minder as Rl 440 per maand (18 miljoen volwassenes) en minder as R2 880 per maand verdien (29 miljoen volwassenes) word onderskeidelik as arm and relatief arm bestempel. Agt-en-sewentig persent van dié wat relatief arm is, het nie toegang tot 'n formele bankrekening nie, terwyl 86% van dié wat arm is, geen toegang het nie. Hierdie syfers toon duidelik dat kommersiële banke nie aan die finansiële behoeftes, met betrekking tot spaar-, krediet-, transmissie- en versekeringsdienste van baie mense voldoen nie, veral nie die armes nie. Daarom dat instellings wat nie deel vorm van die formele finansiële sektor nie en mikrobesparings en mikro-krediet, algemeen bekend as mikro-finansies, in 'n plaaslike gebied en op 'n volhoubare basis verleen, belangrik is. Die doel van hierdie navorsing is tweeledig: Eerstens, bied dit 'n oorsig oor die mikro-finansiering literatuur ten einde die finansiële behoeftes van die armes te ondersoek en die beperkings wat formele finansiële instellings ondervind om mikro-finansiële dienste te verskaf, aan te stip. Beste praktyk rakende die voorsiening van finansiële dienste aan die armes word geïdentifiseer, om sodoende in 'n posisie te wees om 'n opinie te kan vorm oor institusionele suksesfaktore. Tweedens, om a spesifieke Suid-Afrikaanse mikro-finansiële inisiatief, Finanical Services Cooperatives (FSCs) te ondersoek, ten einde vas te stel hoe hierdie inisiatief vergelyk met internasionale beste praktyk en hoe suksesvol dit is in die voorsiening van finansiële dienste aan die armes. 'n FSC is 'n finansiële instelling waardeur mikro-finansiële dienste (spaar-, krediet-, transmissie- en versekeringsdienste) verskaf word aan diegene in 'n plattelandse nedersetting wat nie toegang tot formele bankdienste het me. FSCs maak gebruik van 'n gemeenskap se reëls, gebruike, verhoudings, kennis, solidariteit en hulpbronne en kombineer dit met formele finansiële metodes en konsepte. Dit is 'n inisiatief van die gemeenskap en word deur die inwoners van die nedersetting besit, finansier en bestuur. FSCs is geregistreerde koëperasies in terme van die Ko-operatiewe Wet van 1981, en mag ook deposito's van hulle lede aanvaar op grand van 'n vrystelling van die Bankwet van 1990. Tans ondervind FSCs probleme in die verskaffing van krediet-, transmissieen versekeringsdienste wat hulle verhoed om as tussenganger tussen leners en spaarders op te tree. Na die oorweging van die internasionale beste-praktyk, kan die volgende gevolgtrekking rakende FSCs gemaak word: FSCs tree nie op as tussenganger tussen leners en spaarders nie, soos vereis word van 'n finansiële instelling nie. Dit beperk gevolglik volhoubaarheid. Die mislukking kan toegeskryf word aan beperkte wetgewing, onsuksesvolle regulering en supervisie. Nuwe wetgewing is tans onder oorweging wat die landskap vir mikro finansiering en veral vir FSCs sal verander.

The aim of this study is to determine the extent to which the UN/OSCAL (United Nations Office of the Special Coordinator for Africa and the Least Development Countries) model of microfinance is being applied in the South African context, its scope for application and recommendations for implementation. The hypothesis is that, the better South African microfinance initiatives conform to the model, the more successful it will be in fulfilling the ultimate mission of microfinance which is to supply financial services to the poor by cutting the cost of outreach with beneficial effects on poverty..

The aim of this study is to determine the extent to which the UN/OSCAL (United Nations Office of the Special Coordinator for Africa and the Least Development Countries) model of microfinance is being applied in the South African context, its scope for application and recommendations for implementation. The hypothesis is that, the better South African microfinance initiatives conform to the model, the more successful it will be in fulfilling the ultimate mission of microfinance which is to supply financial services to the poor by cutting the cost of outreach with beneficial effects on poverty..

Among the reasons for financial exclusion is the fact that the poor, being largely illiterate and unemployed, are traditionally perceived as ‘bad credit risks’. This is the dominant perception of the poor in the formal credit markets – a perception that also exists in the microcredit sector. In other words, while information asymmetry is a recognized problem in lender-borrower relationships, lenders consider the problem particularly severe when they contemplate doing business with the poor. A contrasting paradigm, such as the one adopted by Grameen Bank of Bangladesh, views the poor as possessing economic potentials that have not been tapped – that is, as ‘good credit risks’. Grameen Bank’s microcredit features appear to have successfully mitigated the problems of information asymmetry and, to a large extent, made it possible for the poor to access microenterprise credit. Using the Grameen Bank model as a benchmark, this study examined the lending features of private sector microlenders in South Africa and those of KhulaStart (credit) scheme. The aim was to identify how the lending features affect microenterprise credit access. Primary data were obtained through interviews, while relevant secondary data were also used in the study. A key finding of the study was that while the Khulastart scheme was, like Grameencredit, targeted at the poor, the method of its delivery appeared diluted or unduly influenced by the conventional (private sector) paradigm that pre-classifies people as ‘good’ or ‘bad’ credit risks. As a result, the scheme was not robust enough to support microenterprise credit access. This has consequences for job-creation and poverty reduction. Based on the findings, the study maintains that a realistic broadening of microenterprise credit access will not occur unless there is a fundamental paradigm shift in microcredit practices, and unless measures designed to mitigate information asymmetries are sensitive to the historical, economic and sociocultural realities of the South African poor.

Thesis (MTech (Business Administration))--Cape Peninsula University of Technology, 2017. / A highly uneven income distribution and South Africa’s economic structure has over the years produced a larger number of the so called ‘unbankable’ families or households that are not served by the commercial retail-banking sector. Microfinance institutions (MFIs) emerged as an important tool for poverty alleviation and as a substitute in providing access to credit facilities to those individuals. However, many MFIs have failed to sustain and grow their business due to malpractices and poor implementation of sound corporate governance mechanisms. This study aims to identify the impact of corporate governance mechanisms on sustainability at selected MFIs in Cape Town. The study was undertaken in order to bridge the information gap and increase the knowledge base on the issues of corporate governance and sustainability of MFIs as this lack of information may be due to insufficient research in the sector. A survey research design by employing the triangulation method was used to gather data from selected MFIs (n=15) in Cape Town. Quantitative, qualitative and secondary data instruments were used for data collection. Participants for this study were selected through the use of purposive sampling. Data were analysed through SPSS V24 to generate descriptive and statistical results. Cronbach’s alpha value was employed to determine the reliability of the dataset. The study found that most MFIs have no governance mechanisms in place that act as a blue print to address governance issues. Only a few MFIs distinguish the positions of Chief Executive Officer (CEO) and Chairman. In addition, this research showed that MFIs are struggling to be profitable as most of them continuously record lower levels of operational self-sufficiency and return on assets. The study recommends the ideal board size of MFIs, board diversity, separation on the positions of CEO and the Chairman, the use of the King IV report, and strategies for sustainability.

Access to loans and credit facilities has been, and still is, a major problem for a large portion of the South African society. The problem is particularly significant in the disadvantaged and rural areas where the majority of people do not have access to formal banking services. Against this background the government further exacerbated the problem by prescribing legislation, which is thought to protect borrowers from perceived usurious rates. This particular law in contention is the Usury Act (No.73 of 1968). The Act imposes interest rate ceilings on loan finance provided by money lending institutions. The objective of this study was to examine the impact that interest rate ceilings will have on the micro lending market. This was done through looking at a case study based on information obtained from a micro lender. Firstly the study undertook the financial impact analysis on a micro lending business to determine the effect of a change in the maximum interest rate that could be charged by the micro lenders. This process was conducted to help understand the costs, revenues and profits of a micro lending business. The data, which were based on the micro lender’s financial statements, were analysed and evaluated on the basis that the statements reflect the financial position of the micro lender charging an interest rate not exceeding 30 per cent. Calculations were then made to reflect their financial position in the event of them being allowed to charge a maximum rate of 20 per cent, 12.08 per cent and 10 per cent per month. The results showed that micro lenders could make a profit when charging rates of between 30 and 20 per cent. However when the interest rate is reduced to 10 per cent the micro lender start to lose. The bottom line for micro lenders is greatly influenced by their turnover, as large portions of their costs are fixed. Therefore one micro lender might earn economic profits at 12.08 per cent per month, while another might just break-even. Simple and multiple regression techniques were used to analyse the data pertinent to the study. The analyses were performed to show the impact, which ceilings on the interest rate have on the market structure, company size and on the characteristics of loan services. The results were evaluated according to their significance. The findings showed that interest rate ceilings can have positive significant effect on risk and the market structure. Based on the findings of both methods applied to this study, it is evident that the interest rate ceilings could act as a constraint to the provision of credit to low-income earners and operators of small and micro enterprises. The micro lenders offer small amounts of credit to a large number of people, therefore interest rate ceilings may not only ration consumers out of the legal market, but also drive smaller lenders from the market and thus diminish competition. / Dissertation (MSc (Agricultural Economics))--University of Pretoria, 2007. / Agricultural Economics, Extension and Rural Development / unrestricted

The following study is about business angels financing small business start-ups. It explores the aspect of starting up an entrepreneurial venture in which the entrepreneur seeks to secure start-up finance from lenders, raising the various issues that are known to characterise this engagement between the entrepreneur and the lender. Using the phenomenological paradigm, the study seeks to determine the awareness of small scale financing by entrepreneurs in South Africa, to determine the most commonly used source of start-up business funding in South Africa, to assess the extent to which business angel financing could be used to finance businesses in South Africa and to determine the factors impacting the use of business angel financing in South Africa. From these objectives, the study will also seek to determine the extent to which business angel networks could facilitate the financing of business start-ups. Small businesses invariably come up in different policy spheres as the main avenues to social and economic construction across national and regional lines. The importance of a successful business start up to a growing economy should not be underestimated. In line with this is the particular factor of gaining access to start up capital, which continues to emerge as a leading contributor to the success or failure of business start ups. Studies continue to verify that the most common challenge faced by most emerging entrepreneurs is start-up capital, either in the lack of this capital, the unfavourable conditions surrounding its availability, the lack of assets to serve as collateral for its use or the ambiguous flow of crucial information between lenders and providers of finance in the funding relationship (Abor and Biekpe, 2006: 69;Hernandez-Trillo, Pagan and Paxton, 2005: 435, ISPESE, 2005: 7, CDE, 2004: 5; Musengi 2003: 11). Roger Sorheim (2005: 179) refers to business angels as private individuals who offer risk capital to unlisted companies that are struggling to obtain start up capital to finance their business ideas. Business angels are further defined as high net-worth bearers of substantial private capital who predominantly invest in the early stage of high risk high potential return business ventures with a positive further growth potential. Business angel finance is typically a ‘once-off’ early stage form of small firm financing compared to the more frequent later stage venture capitalist funding. Studies show that business angels represent an underutilised wealth creation mechanism when it comes to small firm start-ups as most business angels contribute expertise in addition to finance to the start-ups they get involved in. This brings valuable business insight to the commercialisation of a good business idea. The business angel network exposes a range of potentially viable business prospects to willing investors by facilitating the flow of information about entrepreneurs and their businesses, thereby eliminating ambiguity, information asymmetry and transaction costs (Aernoudt and Erikson, 2002: 178; Van Osnabrugge and Robinson, 2000:374; Macht, 2006:1; Ehlrich, De Noble, Moore and Weaver, 1994:70; Sorheim, 2005:179). To achieve a holistic approach to a phenomenon which appears to be relatively new in South African business circles, the study will follow a qualitative approach in which two categories of populations will be used, one of small business operators and the other of business angels in South Africa. In the study, 20 small business operators and five business angels in Grahamstown will be approached using the convenience and snowballing sampling methods respectively. Face-to-face semi-structured interviews will be used as a data collection method and content analysis will be used as a data analysis tool (Collis and Hussey, 2003:156, Driver, Wood, Segal and Herrington, 2001:32, National Small Business Act ). There has been very limited research on business angels in the South African context, therefore the study would significantly contribute in entrepreneurship, government and small business development circles as it brings about attention to what the researcher predicts is an underutilised business start-up financing option.

This study examines the nature and characteristics of the informal sector within the Makana municipal area in South Africa. The focus is on the socio-economic characteristics of the informal sector operatives; operational characteristics of the microenterprises that we studied, such as longevity, employment generation, growth potential, and linkages of the informal sector with the formal sector of the economy. Extensive studies on the informal sector have been conducted in many parts of the world relative to South Africa. The key finding in most of these researches is that the informal sector is highly heterogeneous. These studies provide us with the parameters for analysing the nature and characteristics of the informal sector in the Makana Municipality. The results of the thesis show that the majority of people in Makana Municipality join the informal sector as a result of such push factors as unemployment, retrenchment and the need to survive. While there is evidence of lucrative activities amongst the surveyed enterprises, most of the informal sector micro-enterprises are concentrated in the lower segment of the sector where earnings are very low. Results from this study reveal that employment generation (beyond owner-operator) is very limited. The co-existence of a small number of remunerative activities alongside a large proportion of relatively unproductive activities is not only a sign of restricted economic potential but, most importantly, it points to the heterogeneous nature of the informal sector. Precisely, the informal sector encompasses activities which are different in terms of asset holdings, earnings, etc. From the study, it is also evident that the informal sector micro-enterprises play a crucial role in distributing goods produced in the formal sector. Evidence indicates that these micro-enterprises are Iinked to the formal sector. The idea of a 'second economy' devoid of linkages with the 'first economy' is of limited heuristic value. Thus, the 'second economy' is an extension of the first.