Get Ahead Foundation Credit Programs in South Africa: The Effects of Loans on Client Enterprises
This paper examines the two loan programmes created by Get Ahead Foundation (GAF) in South Africa namely, the Stokvel Loan Program (SLP), that offers one-year loans to borrowers who form into groups of five for mutual guarantee of loan repayment, and the Business Loan Program (BLP), that was established to develop and test a methodology for lending to higher-level small enterprises considered to have greater potential for growth and employment generation.
The paper assesses the effects of loans from these programs on clients and finds that:
- Clients invested the major portion of their loans in their own businesses;
- Businesses have grown considerably during the loan period, but have not transformed into more formal operations;
- Financial performance of the businesses improved considerably during the loan period;
- Significant increases occurred in the size of employment within the SLP businesses, but not within BLP businesses;
- There were limited change in client management practices during the loan period;
- Few clients diversified their businesses, moved from one sector to another (namely from trade to services or manufacturing), shifted the location of their premises, or started new businesses during the loan period.
The paper concludes that there were no major differences in the effects of the loans on the SLP borrowers as compared with the BLP borrowers. It recommends that GAF should give top priority to consolidating its credit management and administration systems and improving the quality of its loan portfolio to allow for future expansion of these services.
