Selected South African Microfinance Case Studies in Rural Financing

This paper attempts to contribute to the theme of Commercialization: Profitability versus quality based on the failures of microfinance institutions like the Provident South Africa (PSA).

The author highlights some salient features of the South African rural microfinance:

• 49% people live below the minimum living standard;
• The country has only five commercial banks, controlling 80% of the assets;
• Since the creation of Khula, only fourteen MFI and 15 micro credit organizations have survived.

As per the author, major causes for the failure of the MFIs were:

• Poor collection performance;
• Unacceptable levels of bad debt;
• Uncontrollable fraud.

The author suggests the following policy recommendations:

• Measuring performance by the quality of loans, rather than their quantum;
• Providing business development services to reduce the risk of doing business
• Reducing the impact of HIV pandemic as it leads to default due to increased medical and related costs for the clients.