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Presentation The Purpose of this presentation is to present an overview Of the Apex Fund Implementation Strategy May 25th, 2005 Almostten tenyears yearsafter afteritsitsliberation liberationfrom fromwhite whiteminority minorityrule, rule,our ourcountry countrystill stillfaces facesmany manychallenges. challenges. Almost Many of our people are unemployed. Many of our people continue to live in poverty.. Many of our people are unemployed. Many of our people continue to live in poverty.. President Thabo ThaboMbeki, Mbeki,State Stateofofthe theNation NationAddress AddressFebruary,

February,2004. 2004. President SAMAF Pilot Implementation Strategy samaf 1 south african micro-finance apex fund an initiative of the dti Contents DEFINITIONS Samaf Overview Economic Apex Poverty Distribution by Province Samaf target by Household Income Apex Rationale Samaf Pilot Project Plan Samaf Partner Organization Profile to date Samaf Partner Organizations by Province SAMAF Operational Model Re engineering current MCO / FSC to Partner Organizations

PO capacity Levels of Capacity Building Implementation preparedness Financial Co-Operative Pilots Emerging Picture Capacity Building Philosophy APEX PROVINCIAL ROLL_OUT PLAN SAMAF Pilot Implementation Strategy samaf 2 south african micro-finance apex fund an initiative of the dti DEFINITIONS Financial Services Co-operatives Partner Organization Retail Finance Institution Micro Credit Outlet Savings mobilization Institutional capacity building MICROFINANCE/ MICROCREDIT SAMAF Pilot Implementation Strategy samaf 3 south african micro-finance apex fund an initiative of the dti SAMAF Overview MISSION

Toprovide provide professional professionaland andcustomised customisedservices servicestotodevelopmental developmentalmicro microfinance financeinstitutions institutions, , To Throughinstitutional institutionalcapacity capacitybuilding building, ,on-lending on-lendingmicrocredit microcreditfunds fundsand and Through savingsmobilisation mobilisationsupport support savings for broadening broadeningand anddeepening deepeningaccess accesstotofinancial financialservices services for thepoor poorininorder ordertotofacilitate facilitatetheir theirparticipation participationininproductive productiveeconomic economicactivities activities totothe andsmoothing smoothingtheir

theirfinancial financialtroughs troughsfor forbetter betterlivelihoods. livelihoods. and VISION Tobe beaaleader leaderinindevelopmental developmentalMicrofinance Microfinanceoutreach outreachand and To bestpractice practiceininSouth SouthAfrica. Africa. best SAMAFstrives strivestotoattain attainits itsvision visionthrough: through: SAMAF Beingan aneffective effectivemobiliser mobiliserofofcapital capitalfor fordevelopmental developmentalmicrofinance; microfinance; Being Bringinginnovative innovativedevelopment developmentproducts productsand andservices servicestotomarket;

market; Bringing Forgingvaluable valuabledevelopment developmentpartnerships partnershipsbetween betweenbusiness, business,government governmentand andthe the Forging community;and andDeveloping Developinghuman humancapital capital community; themicro-economic micro-economicsphere spherethrough throughsupporting supportingappropriate appropriatecapacity capacitybuilding. building. ininthe SAMAF Pilot Implementation Strategy samaf 4 south african micro-finance apex fund an initiative of the dti First Economy Commercial Banks Commercial Micro Lending

Second Economy Industry Middle Class Salaried working class, and self employed (small business) Existing State Agencies (Khula) Credit Unions, Cooperatives Economically Active Poor) (Micro Enterprise) Very Poor (Survivalist Enterprise) Hard Core Poor/ Destitute SAMAF Pilot Implementation Strategy samaf 5 south african micro-finance apex fund an initiative of the dti Landscape Poverty Distribution % Households living in Poverty Western Cape 4% North West 5% Gauteng 9% Mpumalanga

10% KwaZulu-Natal 11% Northern Cape 12% Limpopo Limpopo 20% Free State Eastern Cape Northern Cape Free State 17% KwaZulu-Natal Mpumalanga Gauteng Eastern Cape 12% North West Western Cape Source: van de Ruit, J. May, and B. Roberts (2001), SAMAF Pilot Implementation Strategy samaf 6 south african micro-finance apex fund an initiative of the dti Landscape Average Household income per month 25000 21591 20000

15000 10561 10000 7427 5504 5000 3575 Samaf target 770 879 1104 1534 2195 0 LSM 1 LSM 2 LSM 3 LSM 4 LSM 5 LSM 6 LSM 7 LSM 8 LSM 9 LSM10

Source: Futurefact Marketscape 2002 SAMAF Pilot Implementation Strategy samaf 7 south african micro-finance apex fund an initiative of the dti APEX RATIONALE WHY THE APEX: Market failure to reach the poor and unemployed with appropriate financial services- OUTREACH & ACCESS Ten year review of Khula by the Government and Khula regarding the Microfinance sector and current modelIMPACT Repeated inputs about gap by Developmental Microfinance Sector , cost of capital and migration of services to the notso-poor.-SUSTAINABILITY VS POVERTY ALLEVIATION Challenges of Institutional and client capacity, as well as poverty focused microfinance.- CAPACITY SAMAF Pilot Implementation Strategy samaf 8 south african micro-finance apex fund an initiative of the dti SAMAF Pilot Project Plan Phase I (Jan December 2005) Short Term Registration Principal Board Selection and Management Appointments-Principal Operational, H/Resources, Budgetary systems- Done

MCO/RFI/FSC capacity & funding-Selection done Loan disbursements by June 2005 Phase II (Jan December 2006) Medium Term Deepening and widening of the APEX model outreach with emphasis on monitoring and evaluation Detailed study of financial support systems dictated by unfolding micro-finance models Recommendations towards emerging financial institution, Phase III (2007 and beyond) Long Term Consolidate all data, experiences and research and recommendations into model SAMAF Pilot Implementation Strategy samaf 9 south african micro-finance apex fund an initiative of the dti RFI Pilots (4) Assumptions They know what they are doing, Apex wants to support their current outreach projections and monitor impact of Apex interventions. Apex will study poverty targeting tools used by WDB and SEF as well as group formation methodologies used. Apex will identify poverty alleviation pilots using same. Apex will facilitate Beehive aspirations within Apex framework. Clear co-operation MOUs will have to be signed. Apex will have a Poverty targeting expert on board, whether in-house or on contract. SAMAF Pilot Implementation Strategy samaf 10 south african micro-finance apex fund

an initiative of the dti MCO Pilots (16) Khula has 16 MCOs that have been inducted into the Apex See provincial spread MCOs operational expenses as per Khula system have been budgeted for by Apex as notice to ensure integration by June 2005. Apex Application package already given to MCOs as initial assessment information. See Apex Operational Model , regarding accreditation process for selection as PO, Capacity building and on-lending funding Apex advocates rationalization of MCO location to achieve outreach. MCOs in one locality were encouraged to open a dialogue among themselves, especially where one is weaker ( in outreach) than the other. MCO capacity building assessments started in March Assumption: Consolidation to be explored as some may not qualify as stand-alone Apex partners. SAMAF Pilot Implementation Strategy samaf 11 south african micro-finance apex fund an initiative of the dti Central Co-Operative Pilots Institutional Capacity Building Assessment for : Saccol-MIS and human resource capacity Ficosa-All round ICB Safobs-All round ICB Dtsacco-All round capacity Independent Village banks- Financial management of savings , governance and microcredit management. SAMAF Pilot Implementation Strategy

samaf 12 south african micro-finance apex fund an initiative of the dti New APEX POs (15) Hluma Africa-E.London Tsosologo-Pta Youth Co-op OPI Church Women-Daveyton Silverlining Domestics RFi- Mpumalanga Masisizane Womens Co-op,Ivory Park Ten others that are being assessed SAMAF Pilot Implementation Strategy samaf 13 south african micro-finance apex fund an initiative of the dti SAMAF Market Portfolio Slide 1 i) POs Per Type MCO (16) 34.04% FSC (12) 25.53% 8.51% 31.91%

NEW (15) RFI (4) Gauteng (5) ii) POs Per Location 4% Free State (2) Eastern Cape (8) 11% KZN (10) 17% 21% Northern Cape (1) 2% 13% Limpopo (6) 11% 4% Western Cape (2) 17% North West (5) SAMAF Pilot Implementation Strategy Mpumalanga (8) samaf 14 south african micro-finance apex fund an initiative of the dti

SAMAF Market Portfolio Slide 2 POs Per Type Per Location Gauteng (1) Free State (1) 8.33% 6.25% Eastern Cape (3) KZN (5) Eastern Cape (3) 25% KZN (3) 31.25% 18.75% 25% 6.25% 16.67% 8.33% Limpopo (1) 16.67% North West (1) 12.5% 25% Limpopo (2) North West (2) Mpumalanga (4)

MCO (16) Mpumalanga (2) 34.04% FSC (12) 25.53% 8.51% 31.91% NEW (15) Gauteng (3) RFI (4) Free State (1) 6.62% Mpumalanga (1) 20% Gauteng (1) 25% 25% Eastern Cape (2) KZN (2) 13.33% 13.33% 6.67% Northern Cape (1) 13.33% 25% Western Cape (1)

25% 13.33% Limpopo (2) Limpopo (1) 6.67% Western Cape (1) 6.67% SAMAF Pilot Implementation Strategy Mpumalanga (1) North West (2) samaf 15 south african micro-finance apex fund an initiative of the dti Apex in the Provinces to date . North West Province Eastern Cape Free State Gauteng KZN Limpopo

Mpumalanga Western Cape Northen Cape 5 9 2 5 8 6 7 2 1 SAMAF Pilot Implementation Strategy samaf 16 south african micro-finance apex fund an initiative of the dti SAMAF Operational Model Receive Application Review PO Application Preliminary appraisal Partnerships for ICB Capacity Building Intervention Field Visit and inspection Approved

Fully accepted/ approval Loan agreement concluded Declined Loan Recovery Outreach Default Orientation course Funds disbursed Monitor and evaluate Repay SAMAF Pilot Implementation Strategy samaf 17 south african micro-finance apex fund an initiative of the dti Re-engineering an MCO/ FSC for sustainability and Outreach Change Financing SAMAF will provide capacity support on a target plan (customer outreach) only On-lending capital provided to support growth but repayment history is important Management (policies,

Change Strategy and Key performance Indicators Change BusinessModel Model Business Products Market Grow market with new products Feedback to SAMAF with regards 2 product development Implemented 2 SAMAF products -Poverty Alleviation (b&c) -MED (b) Capacities of People, process & systems Change Mergers Mergers Acquire &&Acquire (MCO) (MCO) Change Introduce new simplified Key performance indicators Simplify Monthly reporting Re-establish policies Change Costs (fixed & variable) SAMAF Pilot Implementation Strategy Replace internal systems

Standarise all business processes Re-train people Relook cost structures to achieve appropriate cost to income ratio, and Cost per client samaf 18 south african micro-finance apex fund an initiative of the dti Partner Organisation Capability PO PO Capability Capability Maturity Maturity SAMAFCAPACITY CAPACITYBUILDING BUILDINGIMPACT IMPACT SAMAF SAMAF Capacity Building interventions aims to have a Partner Organisation on a capability maturity level where the Partner Organisation can disburse retail finance products to its membership base within an acceptable level of risk and sustainability to SAMAF. This means that Capacity is addressed on all five dimensions of the Partner Organisation Management Management Planning&& Planning Control Control Infrastructure Infrastructure Processes Processes Products

Products People People SAMAF Pilot Implementation Strategy samaf 19 south african micro-finance apex fund an initiative of the dti Levels of Capacity Building POOperations Operations PO POBoard Board&& PO Management Management PO PO Employees Employees Stakeholders&& Stakeholders Customers Customers Poverty Poverty Alleviation Alleviation Micro&&Microenterprise enterprise Development Development Capacity Capacity

Building Building Loans Loans OPERATIONAL DELIVERY CB INTERMEDIATE CAPACITY BUILDING FOR PO GOVERNANCE Capacity Capacity Building Building Grants Grants BASIC CAPACITY BUILDING INTERVENTIONS & BASIC INFRASTRUCTURE SAMAF Pilot Implementation Strategy samaf 20 south african micro-finance apex fund an initiative of the dti Co-Operative Pilots Limpopo Province Mathabathe, Legwareng Village,Sikhukhune Bakenburgh, Mokopane Mpumalanga Matlerekeng Village, Moutse West Masibelela Village, Umtfombo Wempilo Fernie FSC, Gert Sibande District NWest Motswedi, Bakgatla Bakgafela Tribal Office Disaneng, Mafikeng SAMAF Pilot Implementation Strategy samaf

21 south african micro-finance apex fund an initiative of the dti Co-Operative Pilots Free State Poelong, Ratanang Complex,Mphatlalatsane Village Makwane FSC, Qwaqwa E.Cape Mt. Ayliff,Erf 188 Hlanekela Str, Behind Main Rd Mqanduli, Municipality Bldng, Pearston,25 Voortrekker Str. SAMAF Pilot Implementation Strategy samaf 22 south african micro-finance apex fund an initiative of the dti Co-Operative Pilots (see profiles) KZN Ingwavuma, Bambanani T-Junction, Ingwavuma Village KwaMachi, Ezingolweni, Harding Sizathina, Highflats, Ixopo Village,Next to Senzokuhle General Dealer SAMAF Pilot Implementation Strategy samaf 23 south african micro-finance apex fund an initiative of the dti Emerging Picture

MCOs (ex Khula) (16) On Lending : R 9 mil Provincial Spread: 6 # of Members: 16 000 # of Groups: Unknown Profile: Urban/PeriUrban Avg loan: R500/customer Pilot Size: 16 FSCs (DoA) (61) Total Savings: R5.7 mil Provincial Spread: 8 # of Members: 35 000 # of Groups: 61 Profile: Rural Avg savings: R162/customer Pilot Size: 15 SAMAF Pilot Implementation Strategy samaf 24 south african micro-finance apex fund an initiative of the dti Portfolio Institutional Capacity SAMAFOperations Operations SAMAF SAMAF SAMAF Pilot Pilot Portfolios Portfolios Customer Customer Segmentation Segmentation

+4 MCOs MCOs +16 existing PortfolioManager Manager Portfolio +1 FSCs FSCs RFIs RFIs + 10 existing SAMAF SAMAF Portfolios Portfolios Geographical Geographical Segmentation Segmentation New New + 4 existing PortfolioManager Manager Portfolio +1 Migration during Pilot phase to one Partner Organisation Model

+10 new (Spread in four provinces) PortfolioManager Manager Portfolio +1 SAMAF Pilot Implementation Strategy PovertyTool ToolAssessor Assessor Poverty +1 samaf 25 south african micro-finance apex fund an initiative of the dti APEX ROLL-OUT PLAN April/ May launch in NorthWest ProvinceNational & provincial launch (Motswedi Village.) June- Gauteng (need to be close to NW & manage launch impact) July- Limpopo & Mpumalanga August- Eastern Cape & Free State September- KZN & Northern Cape October- Western Cape & UN Year of Microcredit ? SAMAF Pilot Implementation Strategy samaf 26 south african micro-finance apex fund an initiative of the dti HOW Introduction of Apex programme & pilots to Provincial Government with communities.

Joint discussions regarding provincial new sites and profile (Apex/Province) Assessment of partnerships involved and evaluation of contributions if any ( Ledas/Seda) Discussion around Provincial launch and impact LAUNCH Post launch monitoring & evaluation cooperation SAMAF Pilot Implementation Strategy samaf 27 south african micro-finance apex fund an initiative of the dti Thank You SAMAF Pilot Implementation Strategy samaf 28 south african micro-finance apex fund an initiative of the dti

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