Socio-economic impacts of microfinance and repayment performance: a case study of the Small Enterprise Foundation,South Africa

Abstract

The socio-economic impacts of microcredits on women's welfare were studied in northeastern South Africa using a qualitative semi-structured interviewing method. The study focuses particularly on the benefits, disadvantages and challenges obtained from The Small Enterprise Foundation (SEF) microcredit village programmes (Micro Credit Programme (MCP) and the T'shomisano Credit Programme (TCP)). Impacts of microcredits and a comparison of two programmes were analysed on a household level. The results revealed that a number of the poorest women have been released from deepest poverty through the opportunities provided by SEF. The MCP clients, who tend to have a better starting point, seemed to be more educated, able to diversify and improve their businesses as well as being more capable of protecting themselves against vulnerability than the poorer TCP clients. Many repayment problems were caused by group heterogeneity. Particularly in the MCP, the incentive to free-ride seemed to be a problem phenomenon. These drawbacks demonstrate that there are still some unresolved disadvantages in the programmes.