Date: 22/11/2002
Source: Deputy Ministry of Trade and Industry
Title: Hendricks: National Micro-lenders Competition
SPEECH BY THE DEPUTY MINISTER OF TRADE AND INDUSTRY, LINDIWE HENDRICKS, AT THE MICRO FINANCE REGULATORY COUNCIL (MFRC) NATIONAL MICRO-LENDERS COMPETITION, Caesar's Palace, Johannesburg, 22 November 2002
Chairperson of the Micro Finance Regulatory Council Mr Mogase, Programme Director, honoured guests, ladies and gentlemen.
Thank you for inviting me to address you tonight on the occasion of the National Micro-lenders Competition. The aim of this event, which is to promote and encourage excellence and innovation in micro enterprise lending, consumer education, and housing finance is commendable. In particular, addressing the needs of micro enterprises and finding innovative ways to lend to this sector is an area that is critical for the development of our country and an area that deserves the recognition and support that we are giving it tonight.
Micro-lending in South Africa is an interesting industry. We have seen it grow dramatically over the past 10 years and with this growth we as the government have been pushed to respond to the challenges of this dynamic industry. Some of the challenges are legislative and a number of steps and mechanisms have been put in place to try and deal with the problems in the industry although there are many issues that still have to be addressed in the legislative area.
Through the establishment of the MFRC and the good work that is being done by this organisation we have seen some improvements in the lending practices in the industry. We recognise the benefits that micro -lending can bring to people are enormous yet at the same time we see that it has also brought additional hardship to the vulnerable members of our society who fall prey to predatory lending practices and the unethical behaviour of some micro-lenders. It is these unscrupulous lenders that have given the industry a bad name. Their lawless behaviour must be stopped.
The dti's unfair business practices unit has its register filled with complaints about these lenders and people who are operating in gross violation of the law. We are investigating these practices as is the MFRC who I am informed have received close to 7 000 complaints since June 1999 and also have their own investigative processes. It is necessary that we encourage lenders to behave within the law and come down hard on those who do not. Several cases have been referred to the SAPS and arrests and convictions have taken place.
As we see from the awards tonight we would like to encourage good practices and through our punitive measures discourage bad practices.
Another big challenge that we have faced this year is the closing down of Saambou and Unifer, who were amongst the major players in the industry - this has served as a wake up call to all of us. We saw that rapid expansion without taking cognisance of the ability of borrowers to repay loans is a dangerous game. It is also a dangerous game for the borrowers themselves who succumb to easy access to finance to overcome short-term difficulties.
The work done to educate consumers will benefit not only the consumers themselves but also the lenders. Such education programmes will encourage consumers to borrow within their means and inform them of the dangers of over borrowing. This should result in better repayment rates and discourage lenders from resorting to underhanded tactics to retrieve the money lent out. In the past such practices included keeping of bankcards, pin numbers and identity documents; more recently we have seen proliferation in the use of administration orders. More educated and prudent borrowers and better repayment rates will undoubtedly lead to more sustainable lending institutions.
In addition to this, work also needs to be done to educate employers about loan deductions from payrolls and how to act in the employees' best interest when this is done.
The situation that people find themselves in where they over borrow is in part linked to the unemployment and poverty challenges that we face as a country. We recognise these challenges and there is a lot that we as government and the dti in particular are doing to promote economic growth and job creation. We can see the improvement in our economy and over the past two years have seen the tide turning on the job losses that plagued our economy in the early 1990's.
It should be recognised that many of our people have not sat back and idly waited for an elusive formal sector job but have been entrepreneurial and started their own micro enterprises. There are hundreds of thousands of these entrepreneurs and they are overcoming the ill effects of poverty by running their businesses and while doing so are creating jobs and building our economy. I have often said that we cannot undermine or ignore this sector of the business community. The dti and other government departments are exploring how best these businesses can be supported but what many people fail to recognise is that there is an important role for the private sector to play in growing and servicing these businesses. Ladies and gentlemen, the micro-lending sector is an important aspect of servicing this industry as many of these micro businesses and entrepreneurs are constrained in growing their business by their lack of access to affordable finance.
I believe that there are many opportunities for growing lending to the micro-enterprise sector and to do so profitably and ethically. I am pleased that tonight, through the efforts of the MFRC, we are recognising those lenders that have excelled in the area of lending to micro enterprises and in developing innovative products to service this market.
I am encouraged by the entrepreneurs that I meet across this country who are prepared to work hard and to put in the effort that it takes to become successful. We as the dti are trying to give these businesses all the support they deserve and have a number of programmes in place to assist them. However, it does concern me that there are so many people out there who believe that they can become rich without putting in the hard work that it takes. These get-rich-quick schemes such as the pyramid schemes and the new guises that they have taken on have had a negative impact on the micro-lending industry and on people's savings. People who 'invest' R2000 and expect a return of R6000 in a few weeks time for doing no work are fooling themselves and will only get into deeper financial problems when the pyramid collapses. We need to encourage people to behave responsibly and not to support such illegitimate activities and rather to save their money by putting it into legitimate financial institutions or engage in legitimate entrepreneurial activities.
Another huge growth area for micro-lenders is in the provision of housing finance. For many people their house is their most important asset and they often require funds for the upgrade and maintenance of this asset. The micro-lending industry is already very actively involved in this area and I applaud you for that.
To conclude, ladies and gentlemen, there are many challenges and pitfalls facing the micro-lending industry but as you are well aware there are many opportunities. We as the government are supporting the efforts to educate and to protect consumers and to do so without stifling the growth of the industry. More broadly we are involved in areas that impact on the micro-lending industry for example by supporting the development of a vibrant business sector and promoting entrepreneurialism. If you are not already doing so I would encourage you to start looking at and exploring the opportunities that exist in financing the micro-enterprise industry - there is definitely room for substantial growth in this area; although people must guard against issuing excessive credit and reckless lending.
Finally, I would like to congratulate all the winners of the competition. These winners will be announced shortly and I hope that they serve as role models of ethical behaviour and good practices to the broader micro-lending community. The prizes given tonight by the MFRC are quite substantial and are definitely an incentive. The work done by the MFRC to promote a well functioning industry is to be commended and I encourage the micro-lenders in the audience tonight to give this body all the support that it needs.
I thank you for listening to me tonight.
Issued by the Office of the Deputy Minister of Trade and Industry
Source: Deputy Ministry of Trade and Industry
Title: Hendricks: National Micro-lenders Competition
SPEECH BY THE DEPUTY MINISTER OF TRADE AND INDUSTRY, LINDIWE HENDRICKS, AT THE MICRO FINANCE REGULATORY COUNCIL (MFRC) NATIONAL MICRO-LENDERS COMPETITION, Caesar's Palace, Johannesburg, 22 November 2002
Chairperson of the Micro Finance Regulatory Council Mr Mogase, Programme Director, honoured guests, ladies and gentlemen.
Thank you for inviting me to address you tonight on the occasion of the National Micro-lenders Competition. The aim of this event, which is to promote and encourage excellence and innovation in micro enterprise lending, consumer education, and housing finance is commendable. In particular, addressing the needs of micro enterprises and finding innovative ways to lend to this sector is an area that is critical for the development of our country and an area that deserves the recognition and support that we are giving it tonight.
Micro-lending in South Africa is an interesting industry. We have seen it grow dramatically over the past 10 years and with this growth we as the government have been pushed to respond to the challenges of this dynamic industry. Some of the challenges are legislative and a number of steps and mechanisms have been put in place to try and deal with the problems in the industry although there are many issues that still have to be addressed in the legislative area.
Through the establishment of the MFRC and the good work that is being done by this organisation we have seen some improvements in the lending practices in the industry. We recognise the benefits that micro -lending can bring to people are enormous yet at the same time we see that it has also brought additional hardship to the vulnerable members of our society who fall prey to predatory lending practices and the unethical behaviour of some micro-lenders. It is these unscrupulous lenders that have given the industry a bad name. Their lawless behaviour must be stopped.
The dti's unfair business practices unit has its register filled with complaints about these lenders and people who are operating in gross violation of the law. We are investigating these practices as is the MFRC who I am informed have received close to 7 000 complaints since June 1999 and also have their own investigative processes. It is necessary that we encourage lenders to behave within the law and come down hard on those who do not. Several cases have been referred to the SAPS and arrests and convictions have taken place.
As we see from the awards tonight we would like to encourage good practices and through our punitive measures discourage bad practices.
Another big challenge that we have faced this year is the closing down of Saambou and Unifer, who were amongst the major players in the industry - this has served as a wake up call to all of us. We saw that rapid expansion without taking cognisance of the ability of borrowers to repay loans is a dangerous game. It is also a dangerous game for the borrowers themselves who succumb to easy access to finance to overcome short-term difficulties.
The work done to educate consumers will benefit not only the consumers themselves but also the lenders. Such education programmes will encourage consumers to borrow within their means and inform them of the dangers of over borrowing. This should result in better repayment rates and discourage lenders from resorting to underhanded tactics to retrieve the money lent out. In the past such practices included keeping of bankcards, pin numbers and identity documents; more recently we have seen proliferation in the use of administration orders. More educated and prudent borrowers and better repayment rates will undoubtedly lead to more sustainable lending institutions.
In addition to this, work also needs to be done to educate employers about loan deductions from payrolls and how to act in the employees' best interest when this is done.
The situation that people find themselves in where they over borrow is in part linked to the unemployment and poverty challenges that we face as a country. We recognise these challenges and there is a lot that we as government and the dti in particular are doing to promote economic growth and job creation. We can see the improvement in our economy and over the past two years have seen the tide turning on the job losses that plagued our economy in the early 1990's.
It should be recognised that many of our people have not sat back and idly waited for an elusive formal sector job but have been entrepreneurial and started their own micro enterprises. There are hundreds of thousands of these entrepreneurs and they are overcoming the ill effects of poverty by running their businesses and while doing so are creating jobs and building our economy. I have often said that we cannot undermine or ignore this sector of the business community. The dti and other government departments are exploring how best these businesses can be supported but what many people fail to recognise is that there is an important role for the private sector to play in growing and servicing these businesses. Ladies and gentlemen, the micro-lending sector is an important aspect of servicing this industry as many of these micro businesses and entrepreneurs are constrained in growing their business by their lack of access to affordable finance.
I believe that there are many opportunities for growing lending to the micro-enterprise sector and to do so profitably and ethically. I am pleased that tonight, through the efforts of the MFRC, we are recognising those lenders that have excelled in the area of lending to micro enterprises and in developing innovative products to service this market.
I am encouraged by the entrepreneurs that I meet across this country who are prepared to work hard and to put in the effort that it takes to become successful. We as the dti are trying to give these businesses all the support they deserve and have a number of programmes in place to assist them. However, it does concern me that there are so many people out there who believe that they can become rich without putting in the hard work that it takes. These get-rich-quick schemes such as the pyramid schemes and the new guises that they have taken on have had a negative impact on the micro-lending industry and on people's savings. People who 'invest' R2000 and expect a return of R6000 in a few weeks time for doing no work are fooling themselves and will only get into deeper financial problems when the pyramid collapses. We need to encourage people to behave responsibly and not to support such illegitimate activities and rather to save their money by putting it into legitimate financial institutions or engage in legitimate entrepreneurial activities.
Another huge growth area for micro-lenders is in the provision of housing finance. For many people their house is their most important asset and they often require funds for the upgrade and maintenance of this asset. The micro-lending industry is already very actively involved in this area and I applaud you for that.
To conclude, ladies and gentlemen, there are many challenges and pitfalls facing the micro-lending industry but as you are well aware there are many opportunities. We as the government are supporting the efforts to educate and to protect consumers and to do so without stifling the growth of the industry. More broadly we are involved in areas that impact on the micro-lending industry for example by supporting the development of a vibrant business sector and promoting entrepreneurialism. If you are not already doing so I would encourage you to start looking at and exploring the opportunities that exist in financing the micro-enterprise industry - there is definitely room for substantial growth in this area; although people must guard against issuing excessive credit and reckless lending.
Finally, I would like to congratulate all the winners of the competition. These winners will be announced shortly and I hope that they serve as role models of ethical behaviour and good practices to the broader micro-lending community. The prizes given tonight by the MFRC are quite substantial and are definitely an incentive. The work done by the MFRC to promote a well functioning industry is to be commended and I encourage the micro-lenders in the audience tonight to give this body all the support that it needs.
I thank you for listening to me tonight.
Issued by the Office of the Deputy Minister of Trade and Industry
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