Lending woes trouble fund

2009-12-12 11:46

POOR lending practices, fraud, mismanagement and bickering among

senior staff have led to the collapse of 11 of the 30 financial services

co-operatives that have received funding from the SA Micro-Finance Apex Fund

(Samaf).


The chief executive of Samaf, Sithembele Mase, said

the state-owned wholesale micro-financier was sending letters of demand to

recover its loans from defaulting borrowers and was close to filing criminal

charges against members of co-operatives who have committed fraud.


“Some of the co-operatives are ­collapsing because of lack of

corporate governance, misuse of funds, fraud, and infighting between board

members.


“Some of them are on a steep learning curve. They do poor lending

and can’t look after depositors’ funds,” Mase said.


Since its inception in 2006, Samaf has pumped R72 million into 30

financial services co-operatives or village banks and 16 microlenders, which in

turn lend to small informal traders and the working poor.


Of the R72 million, R42 million was extended to these institutions

as credit while R30 million was made available as cash grants to help establish

their operations.


About 50% of Samaf’s loan book is currently in arrears due to a

high default rate, and 7% of loans have since been written off.


However, Samaf is tightening the noose on delinquent co-operatives

that have reneged on loan repayments.

One of these co-operatives is Middledrift

Financial Services Co-operative, a credit provider that owes Samaf more than

R880 000.


Mase said a probe by the forensic investigations division of the

trade and industry department had been completed against the co-operative.


“We will be bringing charges of theft and fraud against its board

members,” Mase said.


Samaf is also sending threatening letters of demand to force the

executives of the co-operatives to repay their debt.

Sakhisizwe Financial

Services Co-operative from Dordrecht in Eastern Cape, for instance, received a

letter of demand from Samaf’s legal department after numerous attempts to get it

to settle its loan failed.


“We will proceed to instruct our attorneys to institute legal

proceedings against your financial intermediary and recover the full outstanding

balance of R121 455.52 plus penalty interest,” reads a letter dated April 18,

2008 from Samaf lawyer Mongezi Menye.


The fax, telephone and cellphone numbers on the brochures of both

Sakhisizwe and Middledrift are no longer in use.

Samaf officials in Eastern Cape

have had to physically visit the office of the Middledrift ­co-operative to

reach its executives and serve them with the court papers.

Sakhisizwe is

currently being liquidated by Samaf and its board members are facing

litigation.


Mase said the board members of the defaulting co-operatives will be

blacklisted.


The slump gripping the South African economy has made some of the

co-operatives vulnerable.


“We are struggling but we have not closed down. Our clients have

lost their jobs due to the economic recession and are unable to repay the

loans,” said Michael Mkhonza, the manager of Fernie Financial Services

Co-operatives.


Mkhonza said the timber sawmills near Fernie, a village 100km east

of the Mpumalanga town of ­Ermelo, had been retrenching workers, hitting his

co-operative in the process.


But Tracey Zangwa, the manager of Kwa-Machi Financial Services

Co-operative from KwaZulu-Natal, said her village bank has not encountered any

problems and was enjoying 100% loan recovery rate.


“So far everything is running smoothly and we monitor the

performance of our loan book. All our clients pay us back and whenever they skip

payments we quickly visit their homes to find out why. They apologise and

continue repaying the loans,” Zangwa said.


She said demand for credit has picked up ahead of Christmas as

small traders and hawkers restock to take advantage of the bumper festive

period. S

he also expected January to be busy as cash-strapped parents prepared

themselves for the re-opening of schools.


Mase said although Samaf had learned some hard lessons about the

microlending industry over the past three years, he was delighted that the

funder has reached 61 000 people through its lending activities.


Samaf has not lost its appetite for risk.

It plans to advance a

further R52 million to the retail micro-­lending industry, particularly

financial services co-operatives.


After three years at the helm of Samaf, Mase believes the

institution could be more effective if it were made corporate and funded to the

tune of R1 billion.

So far, ­government has provided capital of R252 million.

 

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