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

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• 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

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• 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

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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%

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00.0%

0.5%

1.0%

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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

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Poorest Less Poor Least Poor

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CGAP Poverty AssessmentMCP clients

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Poorest Less Poor Least Poor

Non-client

MCP client

CGAP Poverty AssessmentTCP clients

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Poorest Less Poor Least Poor

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CGAP Poverty Assessment

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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

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-0.4

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1 2 3 4 5 6 7 8 9 Loan number

Increased satisfaction with food

Social Performance

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Increased satisfaction with housing

Social Performance

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Increasing average business value

Social Performance

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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

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'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)