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Mar 2005: Our Common Interest: Report of the Commission for Africa
25 Mar 2005: The Autralian — Deserving Credit
22 Mar 2005: Business Day (Johannesburg) — India's Top Retail Lender Sets Up in SA
15 Mar 2005: The Nation (Nairobi) — Funds Appeal for Rural Poor
02 Mar 2005: Financial Times — Drought ends for Africa's 'unbankable'
01 Mar 2005: MFRC Joins Hands With Consumer Directorates to Celebrate World Consumer Rights Day
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Deserving Credit
How one man is doing good at every turn.
The Australian

Social entrepreneur David Bussau has faced some awesome challenges in his life, but Tsunami-ravaged Aceh has shocked him. "This is the worst I have ever seen... just the scale of it." He says. "It's a mammoth problem."

Bussau, the Ernst & Yong 2003 Entrepreneur of the Year, has thrown his global aid agency Opportunity International into the disaster zone. In a significant change of roles, Opportunity is setting up large-scale businesses to help stimulate the local economy and provide jobs for the displaced population.

The Organization in the past has been focused on providing small loans for microcredit to entrepreneurs in developing countries, providing much-needed capital. But as an entrepreneur Bussau says he is constantly looking to try new things. Entrepreneurs "like a challenge", he says. "They look for something which is in the too hard basket and go and throw all their resources and skills at it."

He also says entrepreneurs need flexibility and are "able to move quickly when they see an opportunity and capitalize on it". He has constantly sought new challenges in what he describes as his life "journey".

Born in New Zealand and orphaned, he left the orphanage at 15 to work in a telephone exchange and circus and then opened his first business — a hotdog stand outside a football stadium. Eventually, he leased half a dozen hotdog stands, then worked in a fish shop and hamburger store buying out the owners. He moved to Australia and bought a construction company.

It is then his focus began to shift from making money to helping others. Bussau says that "as you move on in a journey you start to realize you've got gifts that can benefit mankind". "The center of gravity moves off yourself to others".

He used his construction skills and assets to help rebuilding after Cyclone Tracy, which tore through Darwin on Christmas Day in 1974.

But he didn't stay too long, seeking a new job challenge when he moved to Indonesia after a disastrous earthquake, helping build a school, clinic and dam. It was there Bussau realized poverty was often debt-related, with the poor sometimes mortgaging children in a desperate bid to get ahead. Bussau's first loan was $50 to rice farmer Ketut Suwirn, who began garment-making after buying a sewing machine. He now runs an import/export business and fleet of taxis. The method of lending on small scale to struggling entrepreneurs has been dubbed "microenterprise development".

Bussau threw his weight behind the concept, selling his companies and starting a trust fund for disaster relief and to alleviate poverty. At the same time, American Al Whittaker, who was president of Bristol-Myers International, had a similar vision. David and Al joined forces to set up Opportunity International. Opportunity provides small business loans, or "microcredit", mentoring and training to poor entrepreneurs in developing countries, with businesses supported totaling well over 500,000 and ranging from retail to farming. The organization has support partners in seven countries and "implementing" partners in 27 countries, helping some 2500 new families each day. Opportunity International — which sources funds from private donors, churches, governments, corporations and foundations — has taken 3.5 million people out of poverty over the last two years. It has been a resounding success, with 98 percent of loans repaid.

The UN has even declared 2005 the Year of Microcredit. Bussau describes Opportunity's work in Aceh as a "paradigm shift". "In this case you've got a transient population and everybody is still living in tents and refugees — microloans are not sensible." He says. "We're going to establish some businesses there that will create employment."

Bussau estimates some 5000 new jobs will be created in the next three months. Bussau says commercial and social entrepreneurs are non risk-takers. Still, "a social entrepreneur is a bigger risk-taker." He said. "He's not dealing with a social problem."

Bussau says his shift from commercial to social entrepreneur has not been easy, but has been an amazing journey. He recommends entrepreneurs look for international and local opportunities to leverage their skills to help others, rather than simply focusing on the bottom line. "It really depends on where you are in your journey. There are young entrepreneurs who've got their head down and tail up and just making money. But they'd find it (being a social entrepreneur) so much more fulfilling than just business."

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India's Top Retail Lender Sets Up in SA
Business Day (Johannesburg)

INDIA's largest retail bank and second-largest bank by market assets, ICICI Bank, has opened a representative office in SA, and may also apply for a banking licence to set up a branch operation.

ICICI plans to focus on growing SA-India trade links, as well as general trade between India and the rest of Africa.

The bank is the latest in a long line of foreign lenders to set up shop in SA to take advantage of the country's sophisticated banking infrastructure and strong position in Africa. State Bank of India, India's largest bank by assets, started operations in SA in 1997.

ICICI will use its Johannesburg office to co-ordinate trade finance operations with Africa, previously run from India. The bank is also applying for a representative office in Kenya.

"We are not applying for a banking licence in SA just yet," ICICI chief representative for Africa Niranjan Limaye said on Friday.

"We would first like to see how the business unfolds and then apply for a branch licence."

Limaye said new capital requirements for foreign banks to apply for a licence had been raised to R250m-R400m.

"We need to be very clear on our strategy before signing a cheque," he said. "Every penny of capital we bring here has to show returns for our shareholders."

Limaye said ICICI Bank had a 30%-35% share of the mortgages, asset finance, credit card and personal loans market in India. It has also done substantial work in rural and microfinance in India, which he said the group would be able to put to good use in SA.

He said ICICI would focus on private banking and trade finance, and would also explore microlending opportunities in SA, "within regulatory permissions". The bank was proposing to enter into a dialogue with African Bank, Teba, and Capitec to exchange ideas and areas of co-operation.

Last week, ICICI Bank signed a formal agreement with one of the top four South African banks to participate in trade finance transactions, either in primary or secondary markets originated by that bank.

ICICI was started in 1955 as a private-sector, developmentfinance institution initiative of the World Bank, the government of India and Indian industry. Its commercial banking operation was started in 1994, and the original financial institution and the commercial banking entity were integrated in 2002.

"We have a dominant position in the retail market in India and we really only started in those areas in 1998," Limaye said.

Limaye said ICICI had built its position in the Indian market using "alternative delivery channels" rather than building an extensive branch network, which would have been more expensive. He said 50% of transactions at the bank took place on automated teller machines, 10% through call centres and 20% on the internet. Only 20% of transactions took place at the bank's 500 branches.

He said none of the large global banks could boast as high a number of customers not relying on branch networks. ICICI had about 10-million customers in India, of whom 6-million were active on the internet, he said.

ICICI, which is listed in New York, has assets of about $31bn and owns India's largest private sector general and life insurance companies.

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Funds Appeal for Rural Poor
The Nation (Nairobi)

The Central Bank wants more funds made available for the rural areas.

Governor Andrew Mullei said yesterday that greater access and a sustainable flow of credit to small businesses in such areas were necessary in poverty reduction.

He was speaking in his office after receiving a delegation of International Year of Micro-Credit (IYMC) United Nations advisers, led by Princess Maxima Zorreguieta of the Netherlands.

"This group (people in the rural areas) comprises 60 per cent of the population, or 19 million persons who live below the poverty line," Dr Mullei said.

Only about 10 per cent of 1.3 million micro and small enterprises (MSEs) have access to credit and other financial services from the banks, he noted.

Princess Zorreguieta's and her team are in the country to outline the International Year of Micro-Credit, which was launched in November.

The main IYMC objective is the promotion of sustainable and inclusive financial systems for poverty reduction and the achievement of the Millennium Development Goals.

The delegation sought to learn from the Central Bank the steps being taken to promote low-income Kenyans' access to financial services.

High on the agenda was a discussion of the Microfinance Bill, being prepared for presentation to Parliament.

The Bill seeks to find ways to regulate and supervise deposit-taking microfinance institutions.

To promote access to credit by the rural poor, Dr Mullei said, the bank late last year established a rural finance development department to improve their access to credit and finance.

He also highlighted key reforms being carried out in the financial sector, including amendments to both the CBK and Banking Acts.

Laws have also been passed, or are being finalised for presentation to Parliament, covering, among other areas, the monetary policy advisory committee, the Central Bank rate, modernisation of the national payments and settlement system and the introduction of the proceeds of Crime and the Money Laundering Prevention Bill.

The UN advisers include Netherlands Postbank chairman Diederik Laman Trip and Mrs Marilou van Golstein Brouwers, the managing director of Triodos International Fund Management Zeist.

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Drought ends for Africa's 'unbankable'
By Andrew England, Financial Times

Juma Tegu Musafiri, managing director, chairman and founder of Buge Fruits 2000, is a man with big dreams. Sitting outside his home in rural Uganda he describes his ambitious plans to expand his company by developing a domestic market for his dried fruit, accessing regional markets and eventually setting up export lines to Europe and beyond.

"Our food is very nice, it is organic," he says proudly. "We dry it naturally so most of the nutrients are preserved, so we cannot see why we cannot start selling to the populace."

Yet three years ago, the 38-year-old budding entrepreneur did not even have a bank account, and he still has to visit internet cafes to check his company e-mail.

Buge Fruits' "head office" is Mr Musafiri's small, simple house. It is situated off a dirt road, surrounded by pineapple plants and banana trees, and lacks electricity and piped water.

Mr Musafiri's story is typical of businesspeople throughout Africa: men and women running small enterprises, often without access to basic services, with few assets and little chance of building relationships with the risk-averse banking sector. And, without collateral, their chances of moving to the next level are minimal.

But for a few, help is now available in the form of a $5m Uganda "energy fund" set up by the Shell Foundation, the charitable arm of Royal Dutch/Shell. The fund was launched in 2003 as a pilot scheme to assist small and medium-sized enterprises in the east African nation, part of Shell's plan to move away from traditional corporate philanthropy.

The foundation is working in partnership with a local bank, Dfcu, to offer lease financing whereby a company can apply for funding for new equipment. The equipment is paid for by the fund and remains the property of the bank until its value has been repaid, thus reducing its risk.

Mr Musafiri acquired three solar-powered fruit dryers, together worth 38m shillings ($22,350), through the scheme and makes monthly payments of around 1m shillings to finance the "loan" at interest of 17 per cent over five years.

He had approached a bank for a loan once before, but with no collateral - he has no title deeds for his land - he was turned away. The new dryers are more efficient than the smaller, home-made ones he used before and have enabled him to increase his capacity from around 80kg of dried fruit a month to about 200kg and to set a target of 650kg.

As well as using his own fruit, Mr Musafiri buys from local subsistence farmers. He cuts and dries the produce and sells it to Fruits of the Nile, a Ugandan company that exports to Tropical Wholefoods in the UK, where the fruit is used in health foods, snack bars and muesli.

He still faces many hurdles, including heavy reliance on Fruits of the Nile, fluctuating fruit prices and cash-flow problems. But the expansion has spawned new ambitions. "When you are in stress you try to find ways out, so this has started us thinking beyond borders," Mr Musafiri says. "Now we think we can do something better for ourselves."

The fund has also benefited the bank, according to Colin McCormack, managing director of Dfcu Group, by giving it the "confidence to look at SMEs in a more proactive way". Dfcu, which financed half the fund, essentially runs the project.

About 80 SMEs have been assisted so far, Mr McCormack says, adding that it has enabled the bank to go back "to the grass roots" of small business funding.

"Before we would never have known who they were," he says. "We would not have lent to them on a commercial basis because they never had a track record with us or any other prerequisites lenders look for."

The lease-lending aspect of the fund has been critical, he adds, as well as the financing the foundation provides for technical support and to help train farmers in areas such as organic farming.

Fruits of the Nile received 214m shillings from the fund for a freezing container and the building of a new warehouse and Lweza Clays, a tile and brick building company, received 1bn shillings for the construction of a new kiln and modern machinery. Each company has a similar tale: they were previously turned away by banks but are now increasing capacity and employment.

But Mr McCormack acknowledges that the fund is just scratching the surface in a country with an estimated average annual per capita income of $250. Uganda's economy is heavily dependent on agriculture, with many of the country's 24m people reliant on subsistence farming. Just 1.4m of Uganda's 4.5m "working population" have bank accounts, according to Dfcu.

"The fund is not a panacea, but it could help change the mindset of banks and small businesses," Mr McCormack says. "Here, true growth will come through small entrepreneurships, and that's what we have already. We need to get to that next stage and create the value-added chain."

For Shell, the fund is enabling the company to test a new model of development assistance, while also trying to improve the image of multinationals in the eyes of governments and locals, who can be wary. "All energy companies are faced with the challenge that they rarely generate large numbers of long-term jobs, yet that is precisely what local communities and governments increasingly expect," says Chris West, deputy director of the Shell Foundation.

"It makes business sense to pilot new ways of generating and sustaining employment in the SME sector."

Traditional corporate social responsibility, based on philanthropy, was well intended but would never generate long-term sustainable benefits, he argues. "This was an opportunity to test the market and the intention was never to be a one-off, but to scale up."

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MFRC Joins Hands With Consumer Directorates to Celebrate World Consumer Rights Day

Access to credit is the national economy's most important building block, especially at the lower income level and yet, in many segments of the credit market, the potential benefit of access to credit is undermined by misleading disclosure, anti-competitive practices and the very high cost of credit. The challenge, therefore, is to balance appropriate legislation and consumer protection with ways that allow the market to function in a robust and effective manner.

"Credit affects more people and consumers at lower income levels than nearly any other financial transaction and should top the list of consumer protection in terms of urgency and application," says Peter Setou, Education and Communication Manager of the Micro Finance Regulation Council (MFRC). Speaking on the eve of World Consumer Rights Day, Setou pointed out that the issue was all the more urgent in view of the number of people involved and the amount of money involved."The size of the consumer credit market is a massive R362bn, covering some 19 million transactions a year — from mortgages, credit cards and vehicle finance through to micro loans and retail credit," he said.

For the privilege, South African consumers pay around R95bn a year in interest and fees and research is showing that non-disclosure of credit terms in negotiating the loan is the main culprit that makes consumers "feel cheated". This happens when they discover that loan repayments are much larger than expected.

"There were similar disenchantments and even fear in respect of 'zero deposit deals' with residual balances, and deals with zero or small deposits in an initial period," says Setou. "Consumers report having been caught out through these terms, that were generally not well explained and were misleading. The upshot is, in many cases, that the credit provider makes the product appear cheaper than it actually is, thus misleading the consumer into entering into a transaction they may well not be able to afford."

Setou believes that the microlending industry's concerns about the cost of compliance in meeting the provisions of the upcoming Consumer Credit Bill may be misplaced. "They must be balanced with the need for greater consumer protection," he insists, and the need for mechanisms to ensure that there is a greater level of competition in our credit market.

It is of critical importance that South Africa's micro finance legislation is modernised, that information is provided in a manner and format that will allow consumers to make informed choices, that protection is improved, that unfair and abusive practices are curtailed and that anti-competitive practice is eliminated "and World Consumer Protection Day is the ideal occasion to bring attention to these critical factors."

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Fortunata Maria de Aliaga

Fortunata Maria de Aliaga has sold flowers from a street corner. She learned about Banco Sol, a bank affiliated with ACCION International and with three other women, she qualified for a loan that allowed her to buy flowers in bulk. Read Fortunata's entire success story >>
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