Financial intermediation, regulation and the formal microcredit sector in South Africa

Figures & data

Table 1. Selected indicators of the depth and structure of the financial sector

	Domestic credit provided by banking sector (% of GDP)		Liquid liabilities (% of GDP)		Quasi-liquid liabilities (% of GDP)
Countries	1990	1999	1990	1999	1990	1999
South Africa	97,8	155	44,6	45,1	27,2	12,7
Malaysia	75,7	151,6	64,4	136	43	110,8
South Korea	65,7	96,6	54,6	93,8	45,7	84,6
Chile	73	72,5	40,7	52,2	32,8	41,4
Czech Republic	n/a	62,7	n/a	67,9	n/a	43,5
Brazil	89,8	51,8	26,4	31,8	18,5	25,3
Turkey	19,4	49,8	24,1	51,8	16,4	46,2
Poland	18,8	39,3	32,8	42,8	16,6	28,5
Argentina	32,4	35,6	11,5	31,6	7,1	23,9
Mexico	36,6	28,8	22,8	28,9	16,4	20,4
Gabon	20	22,5	17,8	16,6	6,6	6,6
Botswana	−46,4	−69,7	22,1	31,2	13,7	23,6
United States	110,9	164,2	65,5	62,4	49,4	46,4
Germany	105,4	145,2	67,9	78,1	n/a	n/a
Japan	266,8	144	187,5	125,8	159,6	77,4

Source: World Bank (2001:282–4).

Table 2. Selected indicators of the structure and efficiency of the financial sector

	Ratio of bank liquid reserves to bank assets (%)		Interest rate spread (Lending minus deposit rate % points)		Spread over LIBOR (Lending rate minus LIBOR % points)
Countries	1990	1999	1990	1999	1990	1999
Turkey	16,3	19,9	n/a	n/a	n/a	n/a
Czech Republic	n/a	18	n/a	4,2	n/a	3,3
South Korea	6,3	17,2	0	1,4	1,7	4
Poland	20,6	10,7	462,5	5,8	495,9	11,6
Brazil	6,7	8,4	n/a	n/a	n/a	n/a
Malaysia	5,9	8,3	1,3	3,2	−1,1	1,9
Botswana	11	7,5	1,8	5,2	−0,4	9,2
South Africa	3,3	7	2,1	5,8	12,7	12,6
Mexico	4,2	6,4	n/a	16,3	n/a	20,5
Gabon	2	5,7	11	17	10,2	16,6
Chile	3,8	4	8,6	4,1	40,5	7,2
Argentina	7,4	2,6	n/a	3	n/a	5,6
United States	2,3	6,6	1,9	2,7	1,7	2,6
Germany	3,2	6,6	4,5	6,4	3,3	3,4
Japan	1,5	1,8	3,4	2	−1,4	−3,3

Source: World Bank (2001:282–4).

Table 3. Registration statistics (estimates for 1999/2000)

Industry	Number registered	By % of industry	Number of branches	By % of industry
Aggregate	1 309	1,00	5 051	1,00
Closed corporations	1 015	0,78	1 669	0,33
Private companies	182	0,14	2 535	0,50
Trusts	76	0,06	129	0,03
Section 21 companies	16	0,01	48	0,01
Banks	9	0,01	342	0,07
Public companies	9	0,01	326	0,06
Cooperatives	2	0,00	2	0,00

Source: MFRC (2001a).

Table 4. Disbursement statistics (estimates for 1999/2000)

Industry	Total disbursements (rand)	% of industry by value	Number of loans disbursed	% of industry by number
Aggregate	12 950 533 089	100	8 997 254	100
Banks	4 977 518 753	38	669 287	8
Private companies	4 129 801 277	32	2 981 248	33
Closed corporations	2 387 332 901	18	3 439 960	38
Public companies	983 488 023	8	1 413 492	16
Trusts	240 642 899	2	366 482	4
Cooperatives	198 967 480	2	90 390	1
Section 21 companies	32 781 756	0,3	6 395	0,1

Source: MFRC (2001a).

Table 5. Average loan disbursements (estimates for 1999/2000)

Banks	Public companies	Private companies	Closed corporations	Trusts	Cooperatives	Section 21 companies
R7 437,05	R695,79	R1 385,26	R694,00	R656,63	R2 201,21	R5 126,15

Source: MFRC (2001a).

Table 6. Outstanding loan statistics (estimates for 1999/2000)

Industry	Gross loans outstanding (rand)	% of industry by value	Number of loan debtors	Average loan size (rand)
Aggregate	10 984 317 410	100,0	3 414 511	n/a
Banks	5 280 483 101	48,1	1 597 370	7 118
Public companies	2 540 161 129	23,1	588 151	696
Private companies	2 179 432 404	19,8	704 612	1 385
Closed corporations	508 305 471	4,6	429 779	694
Trusts	301 000 148	2,7	36 077	657
Cooperatives	130 747 315	1,2	46 187	2 201
Section 21 companies	44 187 843	0,4	12 335	5 126

Source: MFRC (2001a).

Table 7. Average outstanding loans (estimates for 1999/2000)

Banks	Public companies	Private companies	Closed corporations	Trusts	Cooperatives	Section 21 companies
3 305,74	4 318,89	3 093,1	1 182,71	8 343,27	2 830,83	3 582,31

Source: MFRC (2001a).

Figure 1. Total indebtedness by income category

Table 8. Change in indebted population by income group

	2000 IES (real figures)			1995 IES
Income category	Positive debt	Total population	% positive debt	Positive debt	Total population	Positive debt	% Change (1995–00): % positive debt
R0-5K	271 151	2 134 577	12	56 344	789 522	7	62
R5-10K	449 949	2 420 518	18	105 555	1 844 373	6	216
R10-15K	355 520	1 347 218	26	99 289	1 296 548	8	236
R15-20K	261 743	822 321	31	90 706	873 248	10	198
R20-25K	226 563	604 450	37	75 398	630 255	12	208
R25-30K	157 106	413 832	37	71 268	459 052	16	134
R30-40K	242 899	578 835	41	122 912	684 458	18	128
R40-50K	189 849	358 260	52	103 478	508 145	21	153
R50-75K	353 471	611 283	57	210 057	813 971	26	119
R75-150K	492 731	738 504	65	311 472	977 488	32	103
> R150K	274 080	372 433	73	155 848	391 406	40	82
Total	3 275 060	10 402 230	31	1 402 329	9 268 466	15	100

Source: IES (SSA, 2000), own calculations.

Table 9. Regulatory thresholds of activities by type of MFI

MFI type	Activity that determines regulatory status	Proposed form of external regulation, if required
Category A MFIs
Type 1: Basic non-profit NGO	Making microfinance loans not in excess of grants and donated or concessional funds (loan capital)	None – voluntary registration with self-regulatory organisation
Type 2: Non-profit NGO, limited deposit-taking	Taking minor deposits, e.g. forced savings or mandatory deposit schemes, from microfinance clients in community	None – exemption or exclusion provision of banking law; compulsory registration with self-regulatory organisation
Type 3: NGO transformed into incorporated MFI	Issuing instruments to generate funds through wholesale deposit substitutes (commercial paper, large-value certificates of deposit, investment placement notes)	Registration as corporate legal entity; authorisation from bank supervisory authority or securities and exchange agency, with limitations on size, term and tradability of commercial paper instruments
Category B MFIs
Type 4: Credit union, savings and credit cooperatives	Operating as closed or open-common bond credit union; deposit taking from member clients in the community, workplace or trade	Notification to, and registration with cooperatives authority or bank supervisory authority; or certification and rating by a private independent credit-rating agency
Category C MFIs
Type 5: Special bank, deposit-taking institution or finance company	Taking limited deposits (e.g. savings and fixed deposits from general public beyond minor deposits exemption in banking law). Microfinance activities more extensive than NGOs but operations not on scale of licensed banks.	Registration and licensing by bank supervisory authority, with a limitation provision (e.g. savings and fixed deposits, smaller deposits-to-capital multiple, higher liquidity reserves, limits on asset activities and uses)
Type 6: Licensed mutual-ownership bank Type 7: Licensed equity bank	Non-restricted deposit-taking activities, including generating funds through commercial paper and large-value deposit-substitutes, from the general public	Registration and full licensing by bank supervisory authority as a mutual-ownership or equity bank; compliance with capitalisation and capital adequacy requirements, loan loss provisioning and full prudential regulations
MFI type	Regulatory agency
Category A MFIs
Type 1: Basic non-profit NGO	None, or self-regulatory organisation
Type 2: Non-profit NGO, limited deposit-taking	Self-regulatory organisation
Type 3: NGO transformed into incorporated MFI	Companies' registry agency; bank supervisory authority or securities and exchange agency
Category B MFIs
Type 4: Credit union, savings and credit cooperatives	Cooperatives authority or bank supervisory agency or credit-rating agency
Category C MFIs
Type 5: Special bank, deposit-taking institution, or finance company	Bank supervisory authority
Type 6: Licensed mutual-ownership bank Type 7: Licensed equity bank	Bank supervisory authority

Source: Van Greuning et al. (1998:ii).

Table 10. Major categories of risk faced by MFIs

1. Balance-sheet structure	Past and future risks resulting from intended or unintended changes in the size, structure and composition of the balance sheet
2. Profitability structure	Risks resulting from changes in the composition of various sources of income and expense categories that affect the efficiency of the institution
3. Capital adequacy/solvency	The risk that the institution will have insufficient capital to continue operating at its average risk-weighted asset profile, as well as the risk of non-compliance with internally set or externally prescribed minimum capital standards
4. Credit risk	The risk that a counter-party (including a sovereign counter-party) to a credit agreement will not be able or willing to service the interest or repay the principal
5. Treasury risk
• Liquidity risk	The risk that the institution has insufficient funds on hand to meet its obligations. This risk includes concentration of large depositors or funders, reliance on volatile deposits and funds, and the currency structure of deposits and funds
• Interest rate risk	The risk of an adverse flow of income and expenses and the ultimate diminution in the institution's net equity as the result of adverse changes in interest rates
• Market risk	The risk of capital gain or loss resulting from investments in commodity, fixed interest, equity or currency markets
• Currency risk	The risk of changes in exchange rate having a negative impact on foreign receivables and foreign payables, when the institution has foreign currency-denominated balance sheet items
6. Operational risk	The risk from non-financial areas such as accounting, electronic data processing, loss of market share, employee relations, or physical events causing a financial loss or stoppage in operations

Source: Van Greuning et al. (1998:20).

World Bank 2001 World Development Indicators, 2001 International Bank for Reconstruction and Development/World Bank Washington, Dc World Bank

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Micro Finance Regulatory Council (MFRC) 2001a. Selected industry statistics Johannesburg MFRC

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Statistics South Africa (SSA) 2000 Income and expenditure survey Pretoria SSA

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Van Greuning H Gallardo J Randhawa B 1998 A framework for regulating microfinance institutions Financial Sector Development Department. International Bank for Reconstruction and Development/World Bank Washington, DC World Bank

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