Background

SEF began operations in 1992 with the aim of alleviating poverty in a sustainable manner by enabling the poor to increase their income through microcredit and by assisting them in the accumulation of savings. The performance summary shows that since inception the organisation has disbursed 412,820 loans to the value of R532 million (December 2007). SEF’s recovery performance has been exceptional with bad debts as at December 2007 standing at 0.2%.

Limpopo Province, in which SEF is located, is characterised by severe poverty. 60% of households live below the poverty line and 40% live below half that level. As the organisation’s mission statement suggests SEF works to reach the poor. In 1996 the organisation started a special program which targets the “very poor” - those in the poorest 30% of households in the province. The first program is known as MCP, the Microcredit Programme, and the specially targeted program is known as TCP, the Tšhomisano Credit Programme. As at December 2007, MCP has 15,677 active clients whereas TCP serves 30,063 clients.

Both of SEF’s operations, MCP and TCP, utilise a methodology that has been adapted from that of the Grameen Bank of Bangladesh. In the case of TCP SEF starts working in a community by first conducting participatory wealth ranking or PWR. Thereafter field staff go to the poorest households to motivate the women of those households to start or resume an income generating enterprise. By definition the very poor do not have money and thus once motivated microcredit becomes the means by which the individual will start her business.

While the majority of MCP’s clients are certainly poor, in fact some 20% are very poor, a requirement of this program is that the individual must have been operating a business for at least six months. In this case microcredit is used to change a business from being very fragile to being secure and to attain growth which can dramatically improve household income.

In both MCP and TCP once a client requests a loan she is required to form a group with four others whom she knows very well and trusts. Each of the five must also be interested in obtaining a loan for their own individual businesses. The five group members are then required to guarantee each others’ payments. No other collateral is required. SEF’s loans are only for enterprise and a series of checks are in place to ensure that loans are not diverted for other purposes.

While SEF may not take deposits it strongly encourages savings by the poor by training clients how to open and operate a formal savings account, ensuring that this is done, and then motivating clients to save at each of their fortnightly meetings. Due to its extensive outreach in rural areas SEF’s clients utilise the Post Bank. As at the end of December 2007 the cumulative sum of savings as held by clients in their Post Bank accounts amounted to R 9.03 million.

1. The “household subsistence” level is used as the poverty line. In 2001 this stood at R920 (~US$ 130) per family of five per month. 40% of households in the Limpopo Province live below half this line.
2. Tšhomisano is the Northern Sotho word meaning “Working together”.