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Poverty and micro-finance in South Africa
The drive for poverty alleviation and empowerment of poor communities in South Africa is a crucial necessity given the socioeconomic factors, high rate of unemployment and the effects of the HIV/AIDS epidemic. In the face of the disease, it is crucial that poor rural communities be financially empowered for them to be able, amongst others, to fend for their sick ones, their off-spring and even bury their dead with dignity. According to Khumalo (2003), poverty in South Africa, just like all over the world, is multi-faceted and can manifest in unemployment, hunger, exploitation and lack of access to basic amenities like clean water, education, health-care and sanitation. It is not limited to one racial group in South Africa, but it is prevalent predominantly amongst the Black population group.
Snodgrass (2015) supported this assertion by maintaining that, even to date, the majority of South Africans who live under the poverty line is still Black and female. According to Statistics South Africa (2014), poverty levels in South Africa have dropped since 2006, reaching a low of 45,5% in 2011. The latest indication shows that using the Presidency’s poverty line of earning less than R367 per month, more South Africans are living in poverty. As maintained in the “More South Africans” (2015) article, the number of South Africans living in poverty has increased from 2010 to 2014. In 2010, 20% of South Africa’s population fell below the poverty line; this had increased to 21.5% in 2014.
The main cause of the extent of poverty and inequality is the high rate of unemployment. These three (poverty, inequality and unemployment) are intricately linked. Inequality and unemployment both remain at extremely high levels by historical and international standards (World Bank, 2014). Although much progress has been made since the end of apartheid in 1994, with South Africa using its tax and benefit system, as part of its development programme, to alleviate poverty and inequality, inequality is still a problem in South Africa. According to the World Bank, South Africa is one of the most unequal societies in the world. In South Africa, inequality of household consumption as measured by the Gini coefficient on disposable income, increased from 1993 to 2011, becoming
among the world’s highest. The Gini coefficient is a number between 0 and 1, where 0 indicates total equality and 1 indicates total inequality. It is calculated by finding out the income of all the people in a country and then expressing this information as a cumulative percentage of people against the cumulative share of income earned. The coefficient would register zero (.0 = minimum inequality) for a society in which each member received exactly the same income and it would register a coefficient of one (1.0 = maximum inequality) if one member got all the income and the rest got nothing. According to Statistics South Africa (2014), the Gini coefficient was approximately .65 based on expenditure data (per capita excluding taxes) and .69 based on income data (per capita including salaries, wages and social grants) in 2011. These high levels of inequality are
only slightly smaller than the Gini recorded in 2006.
Inequality poses serious challenges and problems for MFIs in South Africa. Research (e.g. Baumann, 2004; Mokgele, 2008) has shown that South Africa has been unable to generate the type of pro-poor micro-finance sector that has been successful in many other African countries. This situation is brought about by the extreme inequalities that exist in the South African economy, as maintained by Baumann (2004, p.786): “One of the most important external variables confronting South African MFIs is the country’s extreme income inequality”. The high income and social inequality pose serious challenges to the microcredit business in South Africa and is very expensive compared to other developing countries. According to Baumann (2004), it is still expensive to operate a microcredit business even though MFIs are paying their loan officers much less in comparison to most MFIs globally and in Africa.
According to the World Bank (2014), there were around 12 million South Africans who do not have access to a bank account, and millions more with limited access to financial services in 2013. Banking provides effective tools for saving, sending and borrowing money, and mitigating financial risks that can help the poor to withstand setbacks and attain greater financial stability. May (1998) highlighted the role of banks in providing credit:
Banking facilities for people lacking access to them and wanting to be selfemployed should be investigated more closely in South Africa, to give access to credit to the poor and simultaneously make productive use of loans (p.12).
The critical role of access to finance was further given impetus by World Bank Country Director for South Africa (Asad Alam) when he said that focusing on financial inclusion is particularly important in South Africa because of the positive impact it can have, not only for individuals, but for small businesses and the South African economy. There are 12 million adults in South Africa without an account at a bank or other financial institution, and millions more who have poor access to formal financial services (World Bank Report, 2014). Figure 1 depicts the extent of poverty, the high rate of unemployment and poor access to banking facilities in South Africa at the time data was collected for the study.
According to Baumann (2004), the chief cause and manifestation of radical income inequality is the dualism of the South African economy. It consists of a highly modern and sophisticated financial system serving the full range of financial needs of a small group of the South African population, and in contrast, the micro-lending and informal sector that serves the bulk of the population in both urban and rural areas. An economically ‘advanced’ and globally integrated minority, Black and White, coexists with a dependent and marginalised majority, almost entirely Black. In South Africa, these are known as the ‘formal’ and ‘informal’ sectors. He contended that while the formal sector has a human development index comparable to southern Europe, the informal sector have a quality and standard comparable to that of South Asia. The material foundation of this dualism is equally historical and structural. Unlike peasantries elsewhere in Africa, Baumann (2004) posited that South Africa’s rural poor population do not have access to basic ways and means of production examples such as land, due to historical unresolved issues of farreaching settler dispossession. The poor live in overcrowded rural villages jammed between commercialized farmland and game reserves aimed towards attracting tourists.
For those living in urban areas, prospects for self-employment are hugely restricted by the well-developed manufacturing and retail sectors, the most advanced in Africa, that consigns small-scale trading and manufacturing to the periphery. Due to the persistent lack of access to productive resources, the poor and destitute are forced to depend almost entirely on the output of the formal economy for their survival. Things that enhance and support life are obtained only as commodities. Above all, the poor South Africans are structurally prohibited from access to the cash essential to acquire these commodities.
CHAPTER 1: INTRODUCTION
1.1 Setting the scene
1.2 Micro-finance, self-esteem, self-efficacy and poverty .
1.3 The research problem and question .
1.4 Research aims and goals
1.5 The theoretical paradigm
1.6 Research design and method
1.6.1 Science is empirical
1.6.2 Science is public
1.6.3 Science is objective
1.7 Outline of the study
1.8 Structure of the stud
CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
2.2 Micro-finance – beyond good intentions
2.2.1 Defining micro-finance
2.2.2 Micro-finance and microcredit
2.3 The history of micro-finance
2.4 A shift in focus – partnership and commercialization
2.5 Merits and demerits of micro-finance
2.5.1 Micro-finance is detrimental
2.5.2. Micro-finance is beneficial
2.6 Poverty and micro-finance in South Africa
2.6.1 Obstacles faced by MFIs in the South African context
2.7.1 Background
2.7.2 Products and services
2.8 The definition of self-esteem
2.9 Self-efficacy
2.10 The link between micro-finance, poverty and self-esteem
2.11 Conclusio
CHAPTER 3: THEORETICAL FRAMEWORKS
3.1 Introduction
3.2 Economic psychology .
3.2.1 The origins of economic psychology
3.2.2 Economic psychology today
3.3 Critical Theory
3.4 Three main economic structural injustices in South Africa
3.4.1 Racial domination
3.4.2 Gender domination
3.4.3 Social class
3.5 Conclusion
CHAPTER 4: RESEARCH METHODOLOGY
4.1 Introduction
4.2 Critical theory and social research methodology .
4.3 Research strategies and research designs
4.4 Sampling
4.5 Data collection procedures
4.6. Measuring instruments
4.7 Hypotheses
4.8 Data analysis and interpretation
4.9 Ethical considerations .
4.10 Validity and reliability of the study
4.11. Conclusion
CHAPTER 5: RESEARCH RESULTS
CHAPTER 6: DISCUSSION, LIMITATIONS, RECOMMENDATIONS AND CONCLUSION
REFERENCES
