Key factors for commercial banks providing microfinance : a multiple case studies perspective
Thesis (MBA)--Stellenbosch University, 2011.
Little research has yet been undertaken in South Africa about commercial banks that are servicing the microenterprise market. The objective for the current research was to investigate the key factors that should be considered by commercial banks in South Africa servicing the microenterprise market. The focus for the study was on identifying the key factors and on investigating how the key factors were being considered. There are a number of case studies documenting the key factors that international commercial banks have considered. However, in South Africa, there are relatively few documented cases, which rightfully confirms that commercial banks providing microfinance to microentrepreneurs are still in a new line of business that is in its early developmental stages. The first part of the current study aimed to identify the key factors that required consideration, which have been well documented in a number of research reports. The focus was also laid on international commercial banks that offered microfinance services, especially to microenterprises. The intention was to obtain an overview of how international banks have considered the key factors concerned. The second part of the research study aimed to see how South African commercial banks have considered the above-mentioned key factors, using Absa and Capitec banks as case studies. The key factors identified are the following: the operating model; the delivery model; institutional commitment; product development; funding; technical assistance; human resource (recruitment, retention and remuneration); and operations (credit methodology; loan appraisals; lending methodology; collections; branch network; and support services). The international commercial banks whose case studies are reviewed include: Banco do Nordeste; Bank Rakyat Indonesia; the Commercial Bank of Zimbabwe; the Cooperative Bank of Kenya; Banque du Caire; the Agricultural Bank of Mongolia; Hatton National Bank; the Industrial Credit and Investment Corporation of India; and Banco de la Empressa. From the case studies it was seen that some of the commercial banks considered certain factors more than others. The other differentiating factor is how the key factors were considered, because the operating context of the different commercial banks differs. In South Africa, Absa and Capitec Bank have also considered the key factors, however, the operating model and the delivery model are the biggest differentiator as to how the other factors are considered.