The Socio-Economic Impact of Microfinance on SMMEs

Microfinance is not a new phenomenon. Its origin can be traced back to 1976, when Muhammad Yunus set up the Grameen Bank, as experiment, on the outskirts of Chittago University campus in the village of Jobra in Bangladesh. Since then several countries with South Africa inclusive came up and piloted microfinance strategies like Khula and SAMAF in an attempt to reach the poorest of the poor. South African Khula and SAMAF microfinance strategies are distinct replica of Grameen Bank in terms of their methodology and are microfinance wholesalers. The adopted strategies are the agencies of the Department of Trade and Industry who then sell their services to microfinance institutions that are mostly serving SMEs situated in rural areas. The motive of adopting microfinance wholesale agencies was also to implement the resolution of Strauss Commission on provision of rural finance in an attempt to bridge the gaps between first and second economies. These included the provision of collateral free loans to poor people, especially in rural areas, at full-cost interest rates that are repayable in frequent installments..