The Small Enterprise Foundation aims to alleviate poverty through microcredit in rural South Africa, where unemployment and lack of income are major problems. It provides loans to form microbusinesses, with clients forming groups to jointly guarantee loans. Research found that SEF clients experienced improved economic well-being and reduced domestic violence and improved HIV/AIDS outcomes. However, reaching the very poor presents challenges like lower average loan sizes and greater vulnerability if businesses fail. SEF's experience shows that operating rurally can balance costs with productivity given sufficient population density.

1. The Small Enterprise Foundation John de Wit

2. 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

3. 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

4. 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”

5. The experience of poverty in rural South Africa?

6. 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

7. 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

8. 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

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

15. 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

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

21. 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

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

27. Self-Sufficiency

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

30. Challenge Reaching the Very Poor

31. Participatory Wealth Ranking (PWR)

39. PPI findings @ SEF

42. Social Performance

43. Social Performance

44. Social Performance

45. Social Performance

46. Social Performance

47. IMAGE - A cluster randomised control study

48. Research Cohorts

49. 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

50. Results - Economic Well being

51. 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

52. A word of caution !!

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

54. 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

55. 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

56. Glass Ceilings

58. Thank you

59. Social Performance Management

60. 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