Microfinance debate calls for decisive action

Professor Muhammad Yunus joins in the debate around microfinancing in South Africa

July 10, 2009 – Microfinancing has had a positive impact in South Africa and people need to stop looking for handouts and start “doing”. These were two of the key points that came out of session two of an interactive dialogue between Grameen Bank founder Professor Muhammad Yunus, bankers, business people and social entrepreneurs.

The dialogue, organised by the Nelson Mandela Foundation, was held at Turbine Hall in Johannesburg yesterday.

A panel made up of Ben Nkuna from Women’s Development Businesses, John de Wit from the Small Enterprise Foundation (SEF), Buhle Mthethwa from the National Africa Federated Chamber of Commerce and Industry (Nafcoc), Jay Naidoo of the Development Bank of Southern Africa, and Matshilo Motsei from the Waterdown Holistic Health Farm in Nelspruit opened the second session of the dialogue. The participants were then encouraged to discuss microfinance in Africa at their table before reporting back to the audience.

Nelson Mandela Foundation CEO Achmat Dangor moderated the session.

Nkuna began with a presentation defining microfinance and describing the lending landscape of South Africa before going on to the need for microfinancers to exist in South Africa.

Using stories of South Africans who had received microfinancing and now ran successful businesses, Nkuna highlighted the impact of microfinance on South Africa.

He also noted the challenges facing the microfinancing sector and the proposed way forward.

De Wit explained that SEF, much like Grameen Bank, gives out loans to the poorest of the poor, and, like Grameen Bank, focuses on empowering women.

“We’ve disbursed R1-billion and lost 0.3% of that,” he said, before arguing that banks with high default rates were doing more harm than good.

“If you have high default rates you’re doing social harm. If you give money to someone who is very poor and for some reason cannot pay their loan back, you are turning them into a bad debtor as well.”

Some of the benefits of successful microfinancing, said De Wit, were a reduction in crime, a decrease in violence against women and children and an increase in school attendance.

There were not enough microfinancers in South Africa, concluded De Wit, but this was something that could be remedied by collaboration between the business sector and government.

Mthethwa said that as far as she was concerned, poverty could be eradicated.

“But it starts with you,” she said. “We need to start educating people on how to sustain themselves ... In an economic recession, with people being retrenched, we forget that these people are skilled and the grant system should be looking to support these people.”

Motsei added that the values of independence and interdependence were reminiscent of ancient cultures.

Naidoo said that while the “world is filled with good intentions” there need to be “good strategies” to go along with that. He said that we needed to learn from South Africa’s struggle past, where those people who were actively oppressed created powerful institutions.

“We need to stand up and do it,” he said.

“We throw billions at the problems we have without solving them,” he said. “Money is not the solution of all our problems. What we have to look at what people need to do to solve our problems.”

Dangor closed the panel discussion, thanking Naidoo for reminding us of our “democratic expectation: I vote today and expect my house tomorrow ... it’s time for us to change that”.

The dialogue was then opened up to the participants at the tables, who were asked to consider the following questions:

• Alleviating poverty is not just on the South African government’s agenda, but on that of most countries in the world. How do we make sure that the current legislative environment facilitates the alleviation of poverty through initiatives such as the Grameen Bank? Where do we get money for expansion of microfinance? Should we have special legislation for microfinance?
• If you had to devise a scorecard to measure your success in poverty, what key measurements/criteria would you put on the scorecard? Who would the essential participants be? How would you ensure that the key role players are included in the measurement process?

The questions were designed to generate specific actions to eradicate poverty, said Buyani Zwane, CEO of Franklin Covey Southern Africa, who acted as a facilitator for the dialogue.

Before the table dialogues got under way, Zanele Mbeki, wife of former President Thabo Mbeki, said that saying there was enough money was missing the point.

“Over the past 15 years it’s been repeated that money is not the problem when it comes to addressing poverty in South Africa, but [this has not been spoken about in connection with] in microfinance,” she said. “It’s like ‘water, water everywhere, but not a drop to drink’: when the traditional banks need to expand they go to the Reserve Bank for loans to expand.” 

The same cannot be said of microfinance institutions, she continued, for whom there is no such support.

“Saying it’s not about money is dodging the issue. The issue is about money for the poor. Poverty is a major issue in South Africa. Most legislation works against microfinance institutions, not for them.”

With this in mind, the table dialogues got under way.

The main reflections coming out of the table dialogues were that the legislative process needed to be reviewed and that future legislation needed to be made simpler to understand; that there was a need for a strong network for development; that people should stop talking and start doing; that microfinance organisations should practise good values and that existing funding structures could be strengthened.

The feedback from the tables on scorecards suggested measuring by improved living conditions, a higher level of education, access to healthcare and an increased level of savings.

The key role players were identified as the NGO sector, the private sector and academic institutions.

Dangor invited Margaret Mahlake from Women’s Development Businesses to close the session.

She thanked Prof Yunus for his time and said that the ideas that he had expressed could definitely be used to alleviate poverty in South Africa.

“It’s a big challenge, but it starts with us changing our own mindsets when it comes to the way that we look at the poor,” she said.

“One day I hope to visit those museums dedicated to poverty,” she added. She thanked the Minister of Trade and Industry, Rob Davies, as well everyone else who had attended the dialogue.

Dangor added a word of thanks to all the panellists and to Prof Yunus.

Reflections:

“The session was very insightful, in terms of re-awaking the microfinancial institutions discussion in South Africa, where it is very suppressed. I hope that the microfinancial institutions that are here can take today’s lessons and implement them in their own business.” – Nkululeko Luthuli, from the Luthuli Foundation.

“I found the workshop to be inspiring, and it gives hope about the ability to challenge poverty. But the challenge remains, and I would like to see a follow-up that is structured and systematic.” – Sifiso Ndwandwe, CEO of Mine Workers Development Agency.

“It was an answer to many questions on how to break bureaucracy and reach the poor.” – Tshego Manthatha, project manager for Reaction Consulting.

“This is the beginning of the debate. In 1991 we tried, hopefully this time it will take us further.” – Zanele Mbeki.