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Financial intermediation, regulation and the formal microcredit sector in South Africa


  • Reza Daniels


This article evaluates demand- and supply-side aspects of the formal microcredit sector in South Africa and the environment in which the sector is regulated. Although South Africa has a competitive financial sector relative to a sample of upper middle-income countries, the historical bias towards formal sector banking resulted in a lack of appropriate credit instruments for poorer people. In 1992, new regulations facilitated the legalisation of microfinance institutions and, by 2000, the sector had grown to over 2 per cent of total credit extended by the monetary sector, with over 1 300 institutions supplying microcredit to the public. The article presents the first statistics of different types of microcredit institutions as well as some of their disbursement trends, recorded since 1999 by the Micro Finance Regulatory Council. Thereafter, the demand for credit is assessed between 1995 and 2000, before best-practice regulation and South Africa's degree of compliance are discussed.

Suggested Citation

  • Reza Daniels, 2004. "Financial intermediation, regulation and the formal microcredit sector in South Africa," Development Southern Africa, Taylor & Francis Journals, vol. 21(5), pages 831-849.
  • Handle: RePEc:taf:deveza:v:21:y:2004:i:5:p:831-849
    DOI: 10.1080/0376835042000325732

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    Cited by:

    1. James, Deborah, 2012. "Money-go-round: personal economies of wealth, aspiration and indebtedness," LSE Research Online Documents on Economics 42044, London School of Economics and Political Science, LSE Library.
    2. James, Deborah & Rajak, Dinah, 2014. "Credit apartheid, migrants, mines and money," LSE Research Online Documents on Economics 59434, London School of Economics and Political Science, LSE Library.
    3. George Kwadwo Anane & Patrick Brandful Cobbinah & Job Kwame Manu, 2013. "Sustainability of Small and Medium Scale Enterprises in Rural Ghana: The Role of Microfinance Institutions," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(8), pages 1003-1017, August.

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