Supply-side constraints to the growth of microfinance industry in South Africa

Legadima, Lerato (2012-03)


Microfinance and microcredit are relatively new concepts in South Africa, yet the industry has experienced significant consolidation and growth. The industry appears to be progressing towards a sustainable growth phase. The aim of this paper is to study the problems experienced by the microfinance industry in South Africa, with regard to supply-side credit. Respondents ranked 26 challenges affecting the growth of MFIs in South Africa in order to establish the degree in which these issues affected their organisations. The top six issues impacting on the growth of the South African MFIs are: - High operational cost - Increased competition from commercial banks - Increased competition from MFIs - Legislation and regulatory framework - Fraud, There are solutions to most of these challenges. The industry can learn from a recommendation by Africa Diagnostic, which are: “The client must come first; groom leaders; and highlight transparency. All these recommendations are discussed at length.

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