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The Small Enterprise Foundation
John de Wit
• Massive poverty and obscene inequality are such terrible scourges of our time—times in which the world boasts breathtaking advances in science, technology, industry and wealth accumulation—that they have to rank alongside slavery and apartheid as social evils.–Nelson Mandela, Former President
South Africa
South African – Two economies
• GNI per capita (2007)• 86th: Brazil $5,860• 88th: South Africa $5,720• 89th: Mauritius $5,580
• Latin America & Caribbean $5,801 • East Asia & Pacific $2,182 • Sub-Saharan Africa $ 951• South Asia $ 880
Poverty in South Africa
• 42% of population living in poverty
• 18% of African/Black households live below PPP-adjusted “$1.25 a day”
• 51% of African/Black households live below PPP-adjusted “$2.50 a day”
The experience of poverty in rural South Africa?
• Unemployed and no regular income or grants, many dependants
• No family to assist• Frequent begging, eat once a day• Chlidren often miss school or don’t go at all• Poor, mud houses, too small for number of
inhabitants • No assets
Category1
Category
2Category
3Category
4Category
5
• Rely on grants and piece jobs, many dependents• Poorly paid temporary jobs• Struggle to get food• Pensioners with many children (receive state grant)• Children in school, but not regular, children have one
school uniform• 1 room home, sometimes walls of mud
Category1
Category
2Category
3Category
4Category
5
• Earn enough for daily needs – mainly self-employed or temporary work
• Fewer children to care for• Pensioners with fewer dependents (receive state
grant)• Enough food but not of good quality• Children in school – primary and secondary, can
afford to buy uniforms but cannot afford tertiary
Category1
Category
2Category
3Category
4Category
5
The Small Enterprise Foundation
• Aim of poverty alleviation through microcredit
• A section 21 NGO, non-profit• Founded in 1991• Inspired by Grameen Bank
How SEF works …
• Clients form groups of 5• Each receives their own loan for their own
business• All group members guarantee each others
loans• Groups meet fortnightly in Centres of
about 8 groups meeting at a time
Loans are only for business
• For starting or growing a micro-business
• Begin with a verbal business plan
• Loan utilisation is checked
Current Performance
• 70,782 active clients• 850,000 loans since inception• Loans since inception $183 million• Principal Outstanding $15 million• Client savings - $2.6 million
Current Performance …
• Write-off policy: 85 days• Current Portfolio at risk 0.2%• Loan losses since inception 0.3%
Jul-9
9
Jul-0
0
Jul-0
1
Jul-0
2
Jul-0
3
Jul-0
4
Jul-0
5
Jul-0
6
Jul-0
7
Jul-0
8
Jul-0
9
Jul-1
00.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Portfolio at Risk (>30 Days) %
2005 2006 2007 2008 2009 20100.0%
0.5%
1.0%
1.5%
Bad Debt Write-Offsas % of Average Principal
Self-Sufficiency
Operational Self-Sufficiency =
Operational Income___
Operational Expenses
= Loan Interest Income + Investment Income_ Operating Expenses + Borrowing costs
Challenge
Reaching the Very Poor
Participatory Wealth Ranking (PWR)
SEF
MCP1992
Non-targeted
TCP1996
Exclusive targeting
CGAP Poverty Assessment
0%
10%
20%
30%
40%
50%
60%
Poorest Less Poor Least Poor
Non-client
CGAP Poverty AssessmentMCP clients
0%
10%
20%
30%
40%
50%
60%
Poorest Less Poor Least Poor
Non-client
MCP client
CGAP Poverty AssessmentTCP clients
0%
10%
20%
30%
40%
50%
60%
Poorest Less Poor Least Poor
Non-client
TCP client
CGAP Poverty Assessment
0%
10%
20%
30%
40%
50%
60%
Poorest Less Poor Least Poor
Non-client
TCP client
MCP client
Progress out of Poverty Scorecard
Progress out of Poverty Scorecard1. Number of members in the household
2. Number of household members per bedroom
3. Type of toilet facility
4. Main material used for the walls of the main dwelling
5. Main source of cooking energy
6. Does household own gas or electric stove
7. Does household own a microwave
8. Does household own refrigerator or freezer
9. Does household own a television
10. Does household own videorecorder or DVD
11. Does household own a stereo or Hi Fi
12. Did the household have stokvel income in past 12 months
Estimates ‘Poor’ (<$2.50 a day)
‘Very Poor’(<$1.25 a day)
SEF • 77% • 52%
Limpopo Province (rural areas)
• 50% • 16%
South Africa
• 34% • 11%
PPI findings @ SEF
Social Performance
Social Performance
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1 2 3 4 5 6 7 8 9 Loan number
Increased satisfaction with food
Social Performance
-0.8
-0.6
-0.4
-0.2
0
0.2
1 2 3 4 5 6 7 8 9 Loan number
Increased satisfaction with housing
Social Performance
0
500
1000
1500
2000
1 2 3 4 5 6 7 8 9 Loan number
Increasing average business value
Social Performance
0
50
100
150
200
1 2 3 4 5 6 7 8 9 Loan number
Increasing savings / burial society
IMAGE- A cluster randomised control
study
Research Cohorts
Cohort IMAGE ControlLoan recipient 430 430
Household member 1200 1200
Random community member
2000 2000
Analysis
• Follow-up ratio:Intervention: 387/430 (90%) Control: 363/430 (84%)
• Outcomes derived for each village• Analysis performed at cluster-level (village
level)• Controlled for possible baseline
imbalances by calculating adjusted measures of effect
Results - Economic Well being
Adjusted Risk ratio
Household assets 1.15 (1.04 – 1.28)
Membership in savings clubs
1.84 (0.77-4.37)
Greater expenditure in food and clothing
1.23 (0.47 – 3.20)
Results – Violence and HIV/AIDS
• 55% reduction in inter-partner violence
Among 14 – 35 year olds:• 60% increase in going for HIV testing• 25% increase in condom use• 46% better HIV-related communication
A word of caution !!
Some Implications of working with the very poor:
• Lower average loan size– In SEF’s case 20% lower
Some Implications of working with the very poor:
• Improves density of clients• Motivation versus marketing• Loan utilisation checking becomes
important• Loan supervision• Business skills development
A word of caution - Vulnerability
MCP• Access to some non-enterprise resources• Able to smooth cash-flow• Some “safety-net” if business fails
TCP• Practically no other resources • Little ability to smooth cash-flow• Failure back to not knowing where
next meal will come from
Glass Ceilings
Active Clients
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
'92 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02
Thank you
Social Performance Management
Intent and Design
Internal Systems / Activities
Outputs Outcomes Impact
SEF’s operations
SEF’s success shows that the distance, time & cost of operating in rural areas can be balanced by productivity
Ranked 169th in the world
Population density (persons / square km)
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