The Evolution of the South African Microfinance Sector From 1992 to 2004: The Role of the Microfinance Regulatory Council

This paper argues that:

• Over the 1992-2000 period, South Africa's (SA) financial sector reform has been intermittent and reactive, especially in the context of poor and low-income individuals;
• The Microfinance Regulatory Council (MFRC) has played a remarkable role in financial sector development.

The paper lists MFRC's core mandate as follows:

• Formalize the micro lending sector;
• Provide consumer protection;
• Improve information and understanding;
• Manage its business in a self-supporting way, ensuring appropriate training of staff.

The paper lists MFRC's achievements, which include:

• Increasing public and private sector confidence in the small loans sector;
• Establishing norms for compliance and non-compliance around conduct issues;
• Spurring the transformation of the industry structure;
• Ensuring synergy among its objectives, activities and departments in service of the consumer protection mandate;
• Disseminating information about the microfinance sector and contributing to policy development;
• Mobilizing substantial amounts of donor money.

The paper discusses the impact of the MFRC's actions and states that:

• Financial literacy levels are still poor;
• There has been an increase in access to finance;
• The micro lending market features severe concentration and a lack of competition.

The paper discusses issues in SA financial sector development and lists a number of critical issues that need to be addressed. It concludes that MFRC has proven itself as both an effective regulator and an agent of positive change.