In economic terms South Africa is categorised as an upper-middle income country but its apartheid past has left a society which is amongst the most unequal in the world. A striking facet of this is the deep poverty experienced by the majority of South Africa’s population. In Limpopo Province, the area of operation of the Small Enterprise Foundation, 60% of households live below the poverty line while 40% live below half this line.
The goal of the Small Enterprise Foundation, SEF, is to work towards the elimination of poverty and unemployment in a sustainable manner by providing credit for self-employment, combined with savings mobilisation and a methodology that substantially increases the poor’s chances of successful self-employment. The organisation follows a solidarity group lending methodology very similar to that pioneered by the Grameen Bank of Bangladesh. SEF has gained considerable international recognition for its poverty-targeting methodology and its success in reaching and ensuring positive impact on the very poor. The organisation’s poverty targeting tool, Participatory Wealth Ranking, was one of the first such tools officially recognised and promoted by the Microcredit Summit Campaign.
SEF strives to attain its goals through two operational streams, the Micro Credit Programme (MCP) and Tšhomišano Credit Programme¹ (TCP). Whilst MCP, SEF’s original programme, only works with those with existing enterprises, TCP uses Participatory Wealth Ranking to identify the poorest in target communities. Although similar in philosophy and basic structure, the motivational techniques, loan utilisation checks, on-going follow-up and other aspects of this program have been adjusted to address the needs of the poorer population.
SEF commenced operations in January 1992. At the end of June 2016, the programme served 138,827 self-employed clients with a principal outstanding of R302 million². Since inception, SEF has disbursed 2,186,154 loans for self-employment, to the value of R4.6 billion. SEF also encourages the poor to save with the Post Office and the total of SEF client savings as held in their Post Office savings accounts currently stands at R65 million.
SEF has achieved remarkable performance in terms of loan losses. From inception to date, total bad debt write-offs have amounted to less than 0.3% of the cumulative amount disbursed. At the end of June 2016, the portfolio at risk over 30 days stood at 1%.
Due to the inequality of its inherited economy, South Africa is recognised as a particularly tough environment for developmental microfinance organisations to attain financial sustainability. This is even more the case where the objective is to reach the very poor. While the attainment of sustainability has always been a core value for SEF, the organisation first focused on ensuring that it was reaching the very poor and that it was achieving positive impact. With these fundamentals well entrenched, in September 2002 the organisation moved its focus to the attainment of financial self-sufficiency. Full financial sustainability was attained in 2011.
Currently 99% of SEF's clients are female. Typical enterprises include hawkers of fruits and vegetables and new or used clothing, small convenience shops, and dressmakers. On average, each business employs 1.4 individuals, including the owner, on a full-time or part-time basis.
SEF utilises a participatory impact monitoring system which provides testimony to the success of developmental microfinance for the very poor. Even from the first loan people's lives change radically. Very poor families are able to afford three meals a day rather than one. Other families pay school fees and buy uniforms to send their children to school - even to college or university. After a few loans many families improve their houses or expand their business to hire employees. In addition, increase in income, sense of independence and self-reliance results in significant empowerment for SEF clients, especially its women clients.
¹ Tšhomišano is a Northern Sotho word meaning “Working Together”.
² The Rand / US Dollar exchange rate as at 30 June 2016 is R14.68: US$1