John de wit_point_loma_may_4_2011[1]

The Small Enterprise Foundation
John de Wit

Massive poverty and obscene inequality are such terrible scourges of our time—times in which the world boasts breathtaking advances in science, technology, industry and wealth accumulation—that they have to rank alongside slavery and apartheid as social evils.
Nelson Mandela, Former President South Africa

South African – Two economies
GNI per capita (2007)
86th: Brazil $5,860
88th: South Africa $5,720
89th: Mauritius $5,580
Latin America & Caribbean $5,801
East Asia & Pacific $2,182
Sub-Saharan Africa $ 951
South Asia $ 880

Poverty in South Africa
42% of population living in poverty
18% of African/Black households live below PPP-adjusted “$1.25 a day”
51% of African/Black households live below PPP-adjusted “$2.50 a day”

The experience of poverty in rural South Africa?

Unemployed and no regular income or grants, many dependants
No family to assist
Frequent begging, eat once a day
Chlidren often miss school or don’t go at all
Poor, mud houses, too small for number of inhabitants
No assets

Rely on grants and piece jobs, many dependents
Poorly paid temporary jobs
Struggle to get food
Pensioners with many children (receive state grant)
Children in school, but not regular, children have one school uniform
1 room home, sometimes walls of mud

Earn enough for daily needs – mainly self-employed or temporary work
Fewer children to care for
Pensioners with fewer dependents (receive state grant)
Enough food but not of good quality
Children in school – primary and secondary, can afford to buy uniforms but cannot afford tertiary

The Small Enterprise Foundation
Aim of poverty alleviation through microcredit
A section 21 NGO, non-profit
Founded in 1991
Inspired by Grameen Bank

How SEF works …
Clients form groups of 5
Each receives their own loan for their own business
All group members guarantee each others loans
Groups meet fortnightly in Centres of about 8 groups meeting at a time

Loans are only for business
For starting or growing a micro-business
Begin with a verbal business plan
Loan utilisation is checked

Current Performance
70,782 active clients
850,000 loans since inception
Loans since inception $183 million
Principal Outstanding $15 million
Client savings - $2.6 million

Current Performance …
Write-off policy: 85 days
Current Portfolio at risk 0.2%
Loan losses since inception 0.3%

Self-Sufficiency

Operational Self-Sufficiency =
Operational Income___
Operational Expenses
= Loan Interest Income + Investment Income_
Operating Expenses + Borrowing costs

Challenge
Reaching the Very Poor

Participatory Wealth Ranking (PWR)

PPI findings @ SEF

Social Performance

IMAGE
- A cluster randomised control study

Research Cohorts

Analysis
Follow-up ratio:
Intervention: 387/430 (90%)
Control: 363/430 (84%)
Outcomes derived for each village
Analysis performed at cluster-level (village level)
Controlled for possible baseline imbalances by calculating adjusted measures of effect

Results - Economic Well being

Results – Violence and HIV/AIDS
55% reduction in inter-partner violence
Among 14 – 35 year olds:
60% increase in going for HIV testing
25% increase in condom use
46% better HIV-related communication

A word of caution !!

Some Implications of working with the very poor:
Lower average loan size
In SEF’s case 20% lower

Some Implications of working with the very poor:
Improves density of clients
Motivation versus marketing
Loan utilisation checking becomes important
Loan supervision
Business skills development

A word of caution - Vulnerability
MCP
Access to some non-enterprise resources
Able to smooth cash-flow
Some “safety-net” if business fails
TCP
Practically no other resources
Little ability to smooth cash-flow
Failure back to not knowing where next meal will come from

Glass Ceilings

Thank you

Social Performance Management

SEF’s success shows that the distance, time & cost of operating in rural areas can be balanced by productivity
Population density
(persons / square km)
Note to self:
Double-check figures
SEF’s operations
Ranked 169th in the world

John de wit_point_loma_may_4_2011[1]

by San Diego Microfinance Alliance on May 09, 2011

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