South African Microlending Sector Performing Strongly

Johannesburg, South Africa – While microlending disbursements took a mid-year breather, year-on-year growth in the industry continued at a strong pace, showing an increase in disbursements of 30% to R5.77bn ($897 million) and of 8% to R18.5bn ($2.88 billion) on the gross loan book.

According to statistics from the Micro Finance Regulatory Council (MFRC) for the May quarter, borrowing for education purposes headed the list of disbursements at R685m ($106.5 million), followed by housing at R630m ($98 million) and small business funding at about R250m ($38.9 million).

A comparison of lending activity for the quarter ending May 2005 with the previous quarter decreased slightly by 0,8% from R5,82bn to R5.77bn. In the same period, the number of loans extended increased by 1,6% from 3,59m to 3.65m.

Disbursements at nearly R17bn for the 12 months ending May 2004 increased to about R22bn a year later, reflecting a year-on-year increase of 30%, keeping annual activity in the industry at record levels.

Banks continued to be the favoured source of microloans, showing another strong quarter with loans of R2,3bn being issued, some 9,5% higher than reported by the MFRC for the February quarter.

Most private companies felt a 9% seasonal decrease in loan disbursements from R2,6bn to R2.3bn, while then outstanding loan book reflected a small increase from R8,8bn to R9bn. Close corporations, trusts and public companies also felt the effects of the downturn with a 0,4% decrease from R1,025bn to R1,021bn.

Section 21 companies performed moderately well, displaying a 10% increase in disbursements from R43.4m to R47,7m driven by two large Section 21 companies. Section 21 companies’ loan book stood at R79.7m at the end of May. Cooperatives registered with the MFRC reflected a 13.6% decline in disbursements reflecting a turnover of R67.7m in the May quarter.