The economic performance of the sub-Saharan Africa and Latin American countries has
been close linked to their savings and investments (FAO, 2005). The relatively slow
economic growth of Africa has been also been linked to its poor capital accumulation
(Gondo, 2010). Small enterprises and poor populations in Africa still lack access to
deposit, credit and other financial services. Basu et al (2004) noted that only 5 to 6 % of
the Ghanaian and Tanzanian rural population have access to the banking sector
because most of these banks are located in the urban areas. In most of the African
countries, the rural poor has the largest share of the population yet still there is lack of
30
state of MFIs in the world was done in 2010 where the State of Microcredit Campaign
(2012) stated that 3652 MFIs reported reaching 205.3 million clients where 82% of
these clients were women. Considering these figure to the previously lower statistics on
the MFIs, it shows that the microfinance industry is expanding in many parts of the
world.
The State of Microcredit Campaign (2006:5) notes that, “the Tanzanian banking system
has a very limited penetration to the rural clients. Only 4% of the rural population owns a
bank account. The MFIs have a total of about two million deposit accounts. The primary
sources of microfinance services are about 650 Savings and Credit Cooperatives
(SACCOs) with a total number of 130 000 members”. If the microfinance industry in
Tanzania could be jointed to the mainstream financial sector, more rural poor would
benefit.
Basu et al (2004:5) notes that, “three main commercial banks have recently entered the
microfinance sector in Tanzania. Rural banks and regional banks have embarked on
deposit based operations. The major problem these banks have experienced in the
dissemination of microfinance services is that they were all limited in terms of branch
networks across different town and rural communities. However the Tanzania Postal
Bank has used its nation-wide branch networks to promote and mobilise savings,
provide transfers and remittance services.”
In Ghana, MFIs have used Susu associations, clubs and companies to grow their
services (Basu et al, 2004). Susu club operators are clients of the registered financial
31
they are well acquainted with their own clients. The potential role that modern
microfinance has had in poverty alleviation in Africa has sparked changes in national
finance policies and legislation policy in many countries (Gondo, 2010). In Sudan, the
state policy to support microfinance in order to mitigate poverty was expressed in the
National Comprehensive Strategy in the period of 1992 and 2002 (Basu et al, 2004). In
Tanzania, a new microfinance regulation was introduced in 2001 and was revised in
2005. Microfinance regulations in many developing nations focus on improving security,
and prudence in terms of operations. However, the outreach of the micro-financial
services to the rural poorest is still limited.
South Asian countries have done well in terms of raising income levels, assets and the
welfare of the poor (Narayan and Glinskaya, 2007). This has been achieved through
self-help groups like the Self-Employed Workers Association (SEWA) of India. SEWA
was formed in 1972 by some poor illiterate women who were seasonal migrants from
rural areas. One of the aims was to form cooperatives that help members produce and
market the outputs of their labour and to build assets (Narayan and Glinskaya, 2007).
The cooperatives formed in the rural areas have helped women improve the quality and
design of the handicrafts. Cooperatives established by SEWA also promoted new
agricultural products and techniques which added value to traditional products (Narayan
and Glinskaya, 2007). These cooperatives made it possible for the poor women to meet
their daily consumption needs as well as their entrepreneurship funding needs.
Afghanistan has embarked on community driven development with governance reforms
through the National Solidarity Programme (NSP) (Narayan and Glinskaya, 2007).
32
communities across the country. The uniqueness of these programmes is that the
communities themselves make decisions and control resources throughout the project
cycle (Narayan and Glinskaya, 2007). One other interesting thing to note about the NSP
is the election of the members of the Community Development Councils (CDC) who are
elected at village level. This is important because the members of the CDCs have
personal experiences with the challenges that are actually confronting them.
In Bangladesh, the rural poor have accessed loans from the Grameen Bank and
engaged in money generating projects. Speaking at the 7th annual Nelson Mandela
lecture, Muhammad Yunus emphasised the importance and the need to move away
from charity to entrepreneurship (Mail Guardian, 11 June 2012). Instead of seeking
credit for consumption, the poor must take the initiative to embark in some small
entrepreneurship projects in order to generate income that can then be used for daily
consumption needs. When the poor engage in the projects that can help them generate
money, it means that, they are no longer fully dependent on the social grants from the
government.
In 2004, there were 1200 microfinance institutions in Bangladesh of which most of these
are non-governmental organisations (CDF, 2004).In 2005, the microfinance industry in
Bangladesh was able to reach more than 40 percent of the country’s households which
amounts to 16 million poor people (Narayan and Glinskaya, 2007). The scale of
microfinance access in Bangladesh has generated a lot of interest in how the country
managed this high level of access. In the book Ending Poverty in South Asia by
Narayan and Glinskaya (2007) the three main reasons that led to the high levels of
33 Narayan and Glinskaya (2007:5), noted that firstly,
“Bangladesh provided an enabling environment in terms of economic stability and also the regulations by the government allowed the MFIs to expand. Secondly, the organizational innovations within the microfinance industry which included decentralised structures and performance targets made it possible for the success of the microfinance industry. Thirdly, the success of the microfinance industry was attributed to the channeling of subsidies for the capitalization of loans and capacity building”.
South Africa welcomed the concept of microcredit in the 1980s with pioneers targeting a
large black population that had no access to the traditional bank credit system
(Coetzee, 2001). Lenders were not regulated by the government hence they were
charging exorbitant interests above the prescribed rate in the Usury Act of 1968. At the
end of 1992, microcredit was officially effected with an exemption to the usury Act for
institutions providing loans below R6000 (Van Zyl et al, 2009). However, this did not
stop the operations of private lenders; high interest rates, automatic deduction of loan
payment from borrower’s bank accounts (payroll lending).