SEF (Small Enterprise Foundation) is a South African lender most people have never heard of – yet it has no bad debt.
Lending to the poorest of the poor, it has created close to 200 000 jobs.
Many major banks have tried to break into this market, with varying degrees of success – largely due to their lending models relying on collateral and proof of income, which the economically disempowered are unable to obtain.
Small Enterprise Foundation (SEF) has modelled itself on the hugely successful Grameen Bank in Bangladesh, and has managed to succeed where other banks have failed:
- Since 1992, it has awarded R8.7-billion in loans to people who do not qualify for traditional bank loans
- It has created 200 000 jobs
- The percentage of its portfolio at risk is just 0.2%
- Overall, about 3% of SA banks’ combined loan books are non-performing
- Capitec has the highest exposure to unsecured lending, reporting a 12.2% provision for doubtful debts
- Unsecured lending has multiplied four-fold to R200-billion since 2009
- Unsecured lending grew 21% last year alone
- SEF attempts to avoid bad debt by using existing, trusted clients to onboard new ones
- People borrowing money are then allocated to a cell of five or six other borrowers, where each cell member undertakes to cover the loan repayments of the others
- This is a form of positive peer pressure, and ensures loans are recovered