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Hennie Ferreira - MFSA

VIEWS: 26 PAGES: 68

									The Road to Inclusive
      Banking
 Microfinance: Friend or Foe?
    A South African view

           Presented by
          Hennie Ferreira
         3 November 2010
Vision:
Ensuring a sustainable         Micro
Finance Industry

Mission:
Promoting the interests of all members and
their clients through:
   - continuous advocacy
   - creation of development and growth
     opportunities
   - facilitation of member interaction
Values:

- Professionalism
- Client Care
- Ethical Conduct
MFSA Relationships

• BANKSETA
    (Banking Sectorial Education and Training Authority)

•   Credit Ombud (CO)
•   Credit Providers Association (CPA)
•   Department of Trade and Industry (dti)
•   Department of Finance (Treasury)
•   Finmark Trust
  MFSA Relationships

• Payments Association of South Africa
                            (PASA)
• Payment System Stakeholders Forum
                   (PSSF for EDO)
• South African Reserve Bank
                           (SARB)
• EDO Service Provider Association
                               (eSPA)
• Debt Counsel Association of South Africa
  (DCASA)
 MFSA Relationships

• UNISA
• University of Stellenbosch
• University of Pretoria’s Centre of Microfinance
   (UP CMF)
• Various media representatives
• All significant service providers in the
   microfinance sector
  (Most of them are Associated Members of the
   MFSA)
    MFSA Relationships

• Institute of Directors   (IoD)
• National Credit Regulator (NCR)
• National Loans Register (NLR)
• National Debt Mediation Association
                               (NDMA)
• National Register of Credit Agreements
                                   (NRCA)
   MFSA Relationships

• World Consumer Credit Reporting
  Conference - Berlyn
• World Bank Payment System Conference
• Various internationally acclaimed
  microfinance and learning institutions
(Accion, Harvard Business School, Boulder)
Signing of Collaboration
Agreement         2 September 2010
Collaboration Agreement
September 2010
    CPA
                       NDMA




            CIO / CO
 Membership Oct 09 – Oct ‘10
1450                                                                                                         20         14
                                                                                                                           27
                                                                                                     5    14
                                                                                                  140

1400                                                 13
                                                        79
                                                              137
                                                                 9



                                                                                  33         38
1350                                                                           13         13
                                    7       21
                          09     131     13
                       13
                 84
1300          12
          0
       126
                                                                        43
                                                                     12
1250

1200

1150   Oct    Nov     Dec      Jan-10   Febr        Mrt      April   May     June      July       Aug    Sept     Oct


                                                 Total Membership
The Loan Shark is dead
CIRCA 1999
Marven –The Client is King!
Global success of
  Microfinance
BancoSol
Capitec
Equity
 Mobile Banking
• Mobile banking expanded access to
  financial services in Kenya
• Affiliate of Vodaphone
• Launched M-PESA service in March
  2007
• M-PESA allows customers to access
  an electronic payment through
  their mobile phone
 Mobile System
• Unique and transformational financial
  model
• 16,900 Safaricom outlets throughout
  Kenya – cash deposits and withdrawal
• January 2010 M-PESA had 9 million
  customers, 40% of Kenya’s adult
  population
Grameen Banking
    Grameen Bank
    methodology

•   Collateral- free
•   Credit = human right
•   Potential of a person
•   Fight poverty
•   Repayment split into weekly instalments
•   No credit contract
•   Focus on education
Facts of South Africa
25.3%
    Jobs & Tax
• 1m jobs lost in recession
• 4,3 m unemployed in South Africa
• 5,5 m registered tax payers
• 5 m actually paying tax
• 12,8 m formally employed
• 13,8 m people receive welfare
  payments
• Formal net employment figures lower
  than 1994
Development of SA Microfinance
           Sector
   Stimulation of Inclusion

• Exemption to Usury Act 73 of 1968
• Micro Finance Regulatory Council
  in 1999
• National Credit Regulator
• National Credit ACT

    Microlenders ‘uncovered’
        the opportunity
  Purpose of NCA
• To promote and advance the
  social and economic welfare of
  South Africans
• Promote fair, transparent,
  competitive, sustainable,
  responsible, efficient, effective
  and accessible credit market &
  industry
• Protect Consumers
           Going Forward

            Jun'07 Sep'07 Dec'07 Mar'08 Jun'08 Sep'08 Dec'08 Mar'09 Jun'09 Sep '09 Dec '09 Mar '10 Jun '10


Credit-
active
consumers   16.78 16.9 17.12 17.14 17.17 17.53 17.56 17.61 17.79 18.01 18.07 18.21 18.32

Good
Standing    10.67 10.52 10.67 10.55 10.38 10.43 10.26 10.15 9.94 9.92 9.89 9.84 9.73

Impaired
records        6.11 6.38 6.45 6.59 6.79             7.1    7.3 7.46 7.85 8.09 8.18 8.37 8.59


DEFINITIONS:

Good Standing: Client has not missed more than one or two installments with
no adverse listings or judgments

Impaired Record: Accounts with three or more payments in arrears with
adverse listings, judgments or administration orders
Going Forward
                                         Credit Standing of Consumer

18.00
16.00
14.00
12.00                                                                                                                             Credit-active
10.00
                                                                                                                                  consumers
  8.00
  6.00
                                                                                                                                  Good Standing
  4.00
         Jun'07
                  Sep'07
                           Dec'07
                                    Mar'08
                                             Jun'08
                                                      Sep'08
                                                               Dec'08
                                                                        Mar'09
                                                                                                                                  Impaired records




                                                                                 Jun'09
                                                                                          Sep '09
                                                                                                    Dec '09

                                                                                                              Mar '10

                                                                                                                        Jun '10
   Source: NCR Credit Bureau Monitor (Jun'10)




                        Ongoing increase in consumers with
                     Impaired records, from 37.7% in Sept’07 to
                                 46.9% in June‘10

                           Nearly 80,000 people have moved into 3
                                      months in arrears

                                Source NCR Credit Bureau Monitor (June’10)
    MZANZI Accounts 2010

• 4 219 987 accounts
•  Pre-dominantly for ages between 25 – 52
• 63% Black account holders
• 17% Gauteng
• Increase in accounts in Eastern Cape, Free
  State and North West – most impoverished
• Average of R 220.10
• 90% were previously unbanked
Unbanked
 Unbanked

• R12 billion still unbanked
• number of unbanked
  people increased
• Recession
Dangers of Grameenism
 Dangers of Grameenism
• 70 m/150 m live under poverty
  line
• 30m chronic poverty
• 30% - 40% per annum interest
• compelled to take out new loans
• 10% improvement
• 45% deteriorated
Grameen Bank’s ‘wonderful
story’ of prosperity, solidarity
 and empowerment has only
         one problem:
It never happened
             www.pambazuka.org

• Patrick Bond: Prof University of KwaZulu-Natal
  School of Development Studies Centre for Civil
          Society in Durban, South Africa.

  • Khorshed Alam: Executive Director of the
    Alternative Movement for Resources and
        Freedom Society, based in Dhaka
Prof. Muhammad Yunus




     If somebody wants to do
     ‘

 microcredit – fine. I wouldn’t say
   this is something everybody
            should have’
         India’s MicroFinance Focus - 2009
SA History



Saambou
Unibank
  Unsecured credit granted – term
  of loan
Agreements         2010-Q2       2010-Q2
                    R 000      % Distribution

<= 6 Months         107,578          0.92%
7-12 Months         670,245          5.70%
13-18 Months        639,450          5.44%
19-24 Months       1,570,027         13.36%
25-36 Months       2,782,300         23.67%
3.1-5 Years        5,433,084         46.23%
5.1-10 +Years       550,074          4.68%
Total             11,752,757        100.00%
Gross monthly income of individuals
(NCR)

Agreement          2010-Q2            2010-Q2

<=R10K             528,401            65.54%

R10.1K-R15K        130,174            16.15%

>R15K              147,697            18.32%

Total number of    806,272            100.00%
unsecured credit
ATM Loans: A South
  African Example
• Salary : R705 – R755 per week
• Loan : R500
• Charges: R65 (after 3 days)

           Inclusion???
Financial Inclusion
Intention, Purpose and
        Barriers
• Intention: Poverty Alleviation
• Purpose:
   –access to banking,
   –access to affordable credit
   – access to financial advice
Barriers to Financial Inclusion
 Barriers to Financial Inclusion


• pay slips and proof of a
  physical address
• Regulatory Barriers
 –RICA & FICA
             RICA
• Banks will gain from the more
  secure mobile communication
  network created by RICA;
• RICA will shrink the market for
  mobile banking
• February 2010 RICA led to drop
  of 70% in SIM Packaging
Financial inclusion have little to
    gain from the new RICA
          requirements
http://www.fdc.org.au/
• Diversity is desirable - products
• MFIs are often able to reach into
  areas too remote for formal
  financial institutions and
  government agencies
Microfinance remains the most
 potent weapon available for
  reducing financial exclusion




          http://www.fdc.org.au/
One shoe does NOT fit all
  Some
Thoughts
• Who owns the client?
• Who serves the Bottom of the Bottom?
• Who & How do we understand and
  underwrite the risks?
• Why are we not able to take a ‘Responsible
  Corporate Citizenship’
  – Share the risk + Share the upside for the
    benefit of the bigger whole
• One shoe does NOT fit all?
• Poor people should also have choice and
  options
• A bigger Pie can be better shared
• Unemployment can be a seedbed for
  innovative co-operation in
  Development/Enterprise Lending
• Inclusive approach must improve quality of
  live of the poor
     Microfinance
(Inclusive Banking) is
  NOT FOR Sissies 
Thank you

								
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