Key Project Initiatives

We are currently pursuing three projects that we believe will propel the development microfinance sector business forward. We are engaging National Treasury to consider these project initiatives as key to effective financial inclusion of the rural poor. We also believe that National Treasury can participate in the funding of some of these projects as well as provide the leverage we need to get our projects funded by international donors, especially those that work closely with the South African government to build an enabling microfinance environment.

Mobile Banking Project

We are working on participating in a mobile banking pilot project that is intended to address the challenge of the high cost of utilizing the current banking infrastructure in moving money into and out of the clients’ hands. The pilot project will digitize our DMFIs’ cash-based operations and consequently ease the current cost burden on both the DMFIs and their clients, make the movement of money between the DMFIs and clients more efficient and minimize, if not eliminate, the need for widespread use of cash. We believe the pilot will also improve operational efficiencies, enable the introduction of currently unattainable essential services by the poor, and support the collection of essential customer behaviour data that will lead to the introduction of customer-centric products. 

 De-risking DMFIs’ loans

DMFIs in South Africa have not successfully managed an individual liability lending model despite the existence of a huge market of Tier 2 microenterprises. Research by reputable Institutions like The Finmark Trust attributed this failure, in part, to the lack of a supportive environment for the taking of non-traditional collateral. We are, therefore, cooperating with some of our partners to lobby government to introduce new regulations to support appropriate collateral options for microenterprise lending using the individual liability model.

B-BBEE Advocacy

We note that under the current B-BBEE environment, only a small proportion of the B-BBEE spend of corporates is going towards developing the microenterprise sector, despite  microenterprises making up more than 70% of the total MSME sector. As the DMA, we are working on lobbying government to amend the B-BBEE legislation to incentivise a higher level of support for microenterprises, channelled through development microfinance institutions.

Our Operating Environment

Policy, Regulation and Supervision

 There is currently no specific microfinance policy in South Africa. We are engaging with Government to develop an appropriate policy that will address the real needs of the informal and micro enterprises. We believe that such a policy should recognize that informal and microenterprises have unique operational circumstances, and consequently challenges. These are separate and different from those of the small and medium business sector. We believe our Government can learn from other African countries that have specialized microfinance laws. It can then use these learnings to develop South Africa specific microfinance regulations that would create an enabling environment for the informal and micro enterprises.

Funding Environment

The DMA is funded by the fees of our members. Our DMFI members, on the other hand, are funded by grants from donors and on-lending capital loans from DFIs and Social Impact Investors. Locally, the DMFIs access mainly on-lending capital from the: Small Enterprise Finance Agency; (sefa.org.za);

Masisizane Fund; (masisizane.co.za); and,
Symbiotics Group (symbiotics.com).