Innovative Approaches to Delivering Microfinance Services: Credit Indemnity in South Africa

This paper discusses the transformation of a small family owned MFI into a national level listed company, operating in Africa. It discusses achievements of the working model, challenges faced, lessons learnt and recommendations for future work. The takeover of Credit Indemnity by African Banks Investment Limited, witnessed the changes of diverse product range and variable interest rates based on loan risk and loan term.

According to the authors, Credit Indemnity’s success is attributed to:

• Strict lending procedure;
• Limited market competition;
• Flexible interest rate regulations;
• Better management-staff coordination;
• Simple and standardized products;
• Automated information system;
• In-house research team;
• Client care.

Further, the paper elaborates the following challenges faced by this model:

• Maintaining a balance between shareholders interest and demand versus creating a positive image in the minds of the customers and its own culture and values;
• Establishing savings linked loans for informal sector borrowers;
• Increasing the market share by reducing the interest rate, and hence, increasing the portfolio;
• Keeping pace with the growing demand for new products and services;
• Providing cost effective low interest loans to poor.

The article also states a few recommendations, such as enhancing technical skills and access to best practices of microfinance in other countries.