Microfinance Specialists to Debate Financial Market Integration

How successful can Africa be in providing workable financial services for the continent’s millions of “unbanked”, and must there forever be an abyss between a banking service of sorts for the poor and a streamlined and accessible one for the better off?

This is one of the issues delegates at the second African Microfinance Conference in Cape Town, South Africa, will get to grips with in a full three-day agenda.

In tackling the theme “Integrating microfinance into formal financial markets”, speakers will air their views and debate such related topics as microfinance within the parameters of the United Nations’ Millennium Development Goals, integration of financial markets and microfinance in the development of rural areas.

“For Africa to move forward with economic development and poverty alleviation, it’s essential that it has to progress quickly with the integration and transformation of its microfinance industry,” says Rashid Ahmed of South Africa’s Micro Finance Regulatory Council (MFRC). “We have already seen some developments but in most African countries microfinance is still regarded as separate to the formal financial sector and handled as such. Until an energetic and determined effort is made to integrate microfinance into the formal banking systems, we’ll always be playing catch-up.”

Pretoria University’s Professor Gerhard Coetzee says the last 10 years has seen a significant change from the parallel banking system ? one for the poor and the other for the better off ? and cites examples of microfinance operations in Kenya and Tanzania undergoing institutional changes and entering the formal financial sector. Such reform will form the basis of exploring different micro finance models at the Cape Town conference.

SA’s new credit legislation
The conference happens at the emergence of important finance and credit legislation awaiting enactment. Its coming into law will have far reaching effects on the country’s lending industry, including micro loans. Under public discussion is the National Credit Bill and it is probable that it will be signed into law next year.

The National Credit legislation will impact on a huge number of people in a total personal credit market estimated at upwards of R360bn ($55 million) a year, attracting R95bn in interest and fees.

According Gabriel Davel, CEO of the MFRC, the new legislation overtakes and replaces current disparate credit laws for the different personal credit markets, such as micro lending, retail and hire purchase, among others arriving at consistent, enforceable credit legislation. The new law will also encompass debt relief mechanisms, standard marketing/advertising/disclosure practices and the regulation of credit reporting.

Africa will be watching the passage of such laws, and the reaction to them by the various players in the industry, especially the ways in which they are regulated.

The conference is being held under the auspices of the MFRC, the University of Pretoria, the Association of Microfinance Institutions of Uganda and the GTZ-Sida Financial System Development programme in Uganda.