Shared Interest News

“This constitutes a milestone and major precedent,” noted Norman Buckham, CEO of Shared Interest’s partner, the Thembani International Guarantee Fund. “ABSA Bank and Thembani are taking the lead in linking South Africa’s banks to its most marginalized communities.”

As 2005 ended, ABSA, Thembani and Shared Interest signed a memorandum of understanding to create a program through which ABSA will roll out loans to low-income communities, partially backed by Shared Interest guarantees. ABSA and Thembani will bring each other proposals for loans to low-income communities of color, their clients, or development finance institutions that, in turn, lend to individuals. Approved loans will receive partial guarantees ranging from R500,000 to R10,000,000 for one to three years. Shared Interest will continue to adapt its guarantees to clients ranging from micro-finance institutions to rural cooperatives.

[NOTE: R6.27 = $1 on March 20, 2006]

“By partnering with TIGF, ABSA is making banking more accessible to more people and providing financial services to communities which wouldn’t otherwise have access to funding,” explained Roger Scharneck, General Manager of ABSA’s Black Business Development Department.

The new program is significant in South Africa, where financial services have historically excluded black borrowers and low-income communities. Although Shared Interest and Thembani always understood the history and practices of the country’s banks, they encountered an even greater lack of institutional experience and/or will than they had expected. Consequently, Thembani has supplied significant technical assistance not only to the borrowing microfinance institutions, but also to banks.

Now, with a Financial Sector Charter under discussion by stakeholders including financial institutions, government, labor unions and the South African Communist Party, the banks understand that they will soon be expected to report on their lending and “empowerment” practices. Institutions that are not “proactive” could risk losing customers to more socially responsible banks. Moreover, some banks are beginning to recognize the potential of the majority market. The fact that approximately half the country’s population lacks access to banking services provides financial institutions with a tremendous opportunity, moving a number of enterprising bankers to begin to design products and services for township and rural residents for the first time.

During 2006, Thembani and ABSA will roll out their first guaranteed loans under the memorandum. As they provide credit and strengthen financial intermediaries they aim to demonstrate that low-income communities are bankable and strategic partners in South Africa’s development.