PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY. Mr. Sithembele Mase. CHIEF EXECUTIVE OFFICER: samaf. CONTACT : (Marketing Manager)

Transcription

1 PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY Mr. Sithembele Mase CHIEF EXECUTIVE OFFICER: samaf CONTACT : (Marketing Manager) (PA Line) (Direct Line) 1

2 CONTENT 1. Rationale for samaf (policy gap analysis) 2. Mandate and alignment with government objectives Vision and policy objectives Mission and purpose 3. Strategic goals and key objectives 4. Highlights and graphs National footprint and outreach Network disbursements Graphs and highlights 5. Challenges and binding constraints Slow up take of funds by FI s Technical qualification (audit finding) Inadequate legal policy framework Defaulting borrowers Accounting accrual vs cash basis Deposit insurance scheme 6. samaf Employee competency profile 7. Actions Plans and Risks Mitigation Staff training and development Revision of loan agreements samaf evaluation and review 2

3 1.Rationale for the south african micro- finance apex fund 2005 Policy review indicated a financing gap for the enterprising and working poor survivalists and hard core; The financing gap is from R100- R loan per individual; It would not be feasible for a government trading entity to lend directly to the enterprising poor survivalists, as they have particular risks in terms of mobility, volatility, credit risks and other. Their businesses are informal with no fix address; It was therefore considered that the viable method is to encourage the poor to either to establish their own savings and lending vehicles to deliver financial services in terms of getting loans and collecting deposits. It was further envisaged that other existing developmental micro finance institutions will play the role of lending to the poor. samaf was therefore established as a wholesale fund to support the development of these financial intermediaries namely Financial Service Co-ops (FSC s) and Micro Finance Institutions (MFI s) samaf provides loans for on- lending, grants for a institutional capability and technical support to these FI s. 3

4 Micro survivalists (enterprising) and hard core poor) Trading to put food on the table and educate their children 4

5 samaf Mandate and Alignment with Government objectives samaf MANDATE samaf s mandate is to contribute to governments poverty reduction goals by acting as a catalyst for the development of an effective micro- finance sector through: Alignment to Government Policy and Objectives Government policy to create work, eradicate poverty, reduce inequalities and expand economic opportunities for all Support the establishment of sustainable micro- finance institutions that can reach deeper and broader to the enterprising poor; Facilitating the establishment of sustainable micro- finance institutions that can reach deeper and broader to the enterprising poor; and Building a strong, effective and efficient Apex Fund 5

6 Vision and policy objectives samaf VISION samaf envisions a country in which a network of sustainable micro- finance institutions broadens and deepens access to affordable financial services by the enterprising poor through: Alignment to Government Policy and Objectives the dti objectives is to provide broader participation equity and redress in the economy Active and robust participation of the enterprising poor in economic activities which bear fruit; Reduction of financial troughs for a better livelihood; The adoption of best practice models; Competent employees; Utilisation of systems in delivery of services; and A financially sustainable samaf 6

7 Misssion and Purpose samaf MISSION samaf s mission is to provide developmental financial and non- financial services to Financial Intermediaries (FI s) through: The effective mobilization and wholesaling of the capital for micro- finance institutions with proven potential; The development of human capital in the economic environment through capacity building and institutional development; Contributing to policy development in respect of microfinance to inform and support samaf staff, its partners and stakeholders; and The development of valuable partnerships between business, government and the economy Alignment to Government Policy and Objectives The purpose of policy is to mainstream and align developmental micro- finance instrument to: Poverty alleviation Unemployment reduction Job creation Entrepreneurship, thus ensuring decent work 7

8 Strategic Goals and Key Objectives Strategic Goals 1.Contribution to poverty alleviation goals through: 2.Exceed our stake holder expectation through: 3.Improvement of processes to achieve service delivery excellent through: 4.Leverage performance through capacity and people through: Key Objectives 1.1 Fund Intermediaries with loans grants 1.2 Capacitate Financial Intermediaries (with technical support) 1.3 Implement and establish Regulation and Prudential Standards 2.1 Improve outreach through expanded satellite network/offices 2.2 Improve internal turnaround standards and service time lines 3.1 Improve financial reporting and financial management 3.2 Strengthen risk management, fraud and anticorruption 3.3 Increase compliance with legal and PFMA regulations 5.Building sustainable Apex Fund 4.1 Organisational Development (train, manage performance, implement succession plan and career) 4.2 Balance Scorecard & Performance Management (monitor and measure) 4.3 Organisational Design & Change Management (leadership development the 3- in 1 development) 8

9 OFFICE NETWORK Highlights and Graphs National Footprint & Outreach PROVINCE EXISTING OFFICE SATELITE OFFICE LIMPOPO 1 2 MPUMALANGA 1 1 EASTERN CAPE 1 2 KWAZULA NATAL 1 2 GAUTENG 1 0 WESTERN CAPE 1 1 NORTHERN CAPE 1 0 FREE STATE 1 1 NORTH WEST 1 0 Total 9 9 FI Network: (Disbursements by province) PROVINCE NO OF FI S AMOUNT DISBURSED LIMPOPO 7 R5.4m MPUMALANGA 5 R12.4m EASTERN CAPE 5 R3.1m KWAZULA NATAL 4 R2.5m GAUTENG 6 R18.4m WESTERN CAPE 7 R6.2m NORTHERN CAPE 1 R2,1m FREE STATE 2 R0, 5m NORTH WEST 5 R1.9m Opening balance & R4.4m Indirect Grants Total 42 R57.1m 9

10 Fund Approvals Approved funds (year- by- year) 2006/7 approvals of R55.2m for 31 FI s 2007/8 approvals of R30.6m for 7 FI s 2008/9 approvals of R10m for 4 FI s Total funds approved for 42 FI s is R96m since inception to date 10

11 Disbursements Approvals Loan approvals vs loan disbursements since inception Accumulative amount approved since inception to date is: R96m Accumulative amount disbursed since inception to date is: R57.1m R39m has not yet been disbursed due to the following reasons: All institutions are being assisted on implementation of proper financial reporting systems in order to draw down the funds. 11 FI s are under liquidation,due to financial mismanagement and are on the verge of closing down. They can no longer draw down the funds 11

12 Grants support and capacity grants Grants disbursed for institutional capacity building) For 2006/7 institutional capacity building grants to Financial Intermediaries was R10.7m For 2007/8 institutional capacity building grants disbursed to Financial Intermediaries was R5.9m For 2008/9 institutional capacity building grants disbursed to Financial Intermediaries was R3.4m Total grants disbursed since inception to date R21m 12

13 Beneficiary ( Borrowers) Borrowers 2006/7: 4346 borrowers (micro- survivalists hard core poor) 2007/8: borrowers (micro- survivalists hard core poor) 2008/9: borrowers (micro- survivalists hard core poor) The cumulative total since inception to date is borrowers) (micro- survivalists hard core poor) 13

14 Deposit mobilisation Savers (deposits) 2006/7: savers 2007/8: savers 2008/9: savers Deposits to the total value of R15.1m has been mobilised by the poor (survivalists) entrepreneurs to date 14

15 Loans and access to finance On- Lending Disbursements 2006/7: R9.1m loan disbursement s for on- lending 2007/8: R18.5 loan disbursement s for on- lending 2008/9: R 9.1m loan disbursements for on- lending Total disbursement since inception to date R36.7m 15

16 Loan repayment Loan Repayment Rate (Annually) 2006/7: 14% (RR) loan repayment rate 2007/8: 70% (RR) loan repayment rate 2008/9: 40% (RR) loan repayment rate The loan repayment rate improved in 2007/8 however in 2008/9 the sources of income for poor households were put under financial strain due: to high food prices, low remittances to poor households ; and general price increase (inflation : CPIX) 16

17 Challenges and binding constraints 5.1 Slow uptake and draw down of approved funds by FI s due to inability of the FI to report adequately in terms of section 38 (i) (d) (i) of the PFMA. This results in FI s getting financially distressed and closeing down; loan agreements worth R15m were inherited in 2006/7. The contracts were poorly drafted such that there is an element of controls in terms of AC132 and IAS27 GAAP and IFRIS. This resulted in a qualified technical audit opinion by the Auditor general. The contracts had a 3 ½ year of life. They will expire during the year The legal framework governing samaf is not adequate for instance- board members have an advisory role and do not have fiduciary powers; 5.4 The PFMA does not give clear powers to samaf to litigate loan defaulting borrowers. The minister has to be the litigant which is not political and legally tenable; This is due to the trading entity status of samaf 5.5 Inappropriate and inadequate financial systems in that samaf operates on an accrual accounting basis, government financial systems (BAS) operate on cash accounting basis. This results in samaf having to do manual reconciliations and be subject of significant audit findings. 5.6 The policy framework for developmental micro- finance special deposit taking and asset mobilisation for poor communities is unclear, inadequate and not supportive. For instance the Co- operative Bank Act excludes FSC with less than R1m and 200 members from benefiting on deposit insurance scheme indemnity cover. Co- Operative Banks and Commercial Banks with more than R1m assets and more than 200 members do get insurance cover for deposit taking. This is a policy gap in the developmental micro- finance space. 17

18 The 3 in 1( A samaf employee must have all 3 competencies in 1) 100% Developmental (opportunities & capacity) We conducted a review of core skills & competencies required for samaf. The following are the competencies required to take samaf forward: Developmental (opportunities & capacity): Identifying market opportunities that will assist samaf s goals in supporting rural peri- urban communities. samaf employee Building capacity for financial intermediaries in order to sustain themselves and achieve samaf s mandate of alleviating poverty Financial (discipline and management): 100% Financial (performance & discipline) 100% Social (people & leadership) To inculcate a culture of financial performance & discipline and ensuring financial reporting systems are in place. Social (people & leadership): To ensure adequate people leadership; thus aligning people capabilities to the strategic objectives. Also inspiring people for higher achievement. Activism and dirtying of hands to ensure managers can engage poor communities honestly, fairly and with respect, thus creating a` leadership that will support the execution of samaf s mandate. 18

19 Actions taken to mitigate challenges and risks 7.1 samaf has embarked on various training programes of its staff in order to impart skill on financial discipline, social engineering and development experts. This allows samaf to meet its developmental mandate, implement appropriate training, monitoring and report accordingly; 7.2 The new management immediately redrafted new loan agreements when it arrived. The new loan agreements are compliant with GAAP and IFRIS standards (AS27 & AC132). samaf has also renegotiated and amended the previously poorly drafted agreements with 15 FI s; thus reducing the risks of non- consolidation from the original amount of R15m to R3m to date; 7.3 samaf has appointed independent service providers to conduct an extensive review of it s three year operations The evaluation will cover the period from April March 2009; and will evaluate what has been done, what lessons have been learnt, what are the binding constraints (legally, policy wise, and operationally), what are the solutions and how are other wholesale funds structured, funded, and configured for effectiveness and efficiency 7.4 A policy paper will be developed regarding the insurance deposit cover for small FSC with less than R1m assets. The paper will be submitted to both ministries of economic development and trade and industry for 19

20 The enterprising poor trading to put food on the table for survival 20

21 Financing opportunities for community based Financial Intermediaries to benefit working poor and the enterprising communities. 21

22 THANK YOU 22