Township-Based Microlenders: A Profile

Understanding the role of township-based microlenders in the South African financial markets
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This paper presents:

  • A profile of the microlenders operating in townships;
  • Views of the microlenders on:
    • Regulatory environment;
    • Constraints and challenges faced;
    • Their potential roles.

The paper states that the research methodology followed was:

  • Stakeholders interview;
  • Detailed questionnaire.

The paper also provides an overview of international experience with respect to money lenders. It describes the profile of the lenders, including:

  • Legal status;
  • Human resources and capacity;
  • Clients profile and target market;
  • Loan size and loan application processes.

The paper examines microlending business with respect to:

  • Modes of operation;
  • Premises from where lending activities are carried;
  • Engagement in other businesses.

As per the paper, the developmental needs of the lenders to ensure their growth and development include:

  • Access to funding;
  • Training in the areas of:
    • Business management;
    • Customer care;
    • Regulatory issues.
  • Awareness and education targeted at consumers allowing them to make informed decisions.

The paper concludes with specific aspects that could be addressed by the new regulator, Microfinance Regulatory Council (MFRC):

  • Differentiation of lenders;
  • Briefing about the objectives of the government;
  • Communication of new regulations to microlenders;
  • Provision of capacity building and training to:
    • Microlenders;
    • Clients;
    • Associations;
    • Government.

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