Improving the provision of financial services to micro-entrepreneurs, emerging farmers and agribusiness: Lessons from Kwazulu-Natal

Three development finance institutions (DFIs) which operate in KwaZulu-Natal (KZN)province were assessed in 1996/97 to see how they could improve financial viability andoutreach to emerging farmers, agribusiness and micro-entrepreneurs. Improved servicequality and emphasis on mobilising savings would help clients and enable the DFIs todiversify their portfolios. Better access to branches and lower loan approval times (improvedscreening and administrative procedures) could also lower client transaction costs. Charginga suitable interest rate spread is necessary but not sufficient for lenders to achieve subsidyindependence. Reducing arrears through stricter loan contract enforcement (borroweraccountability for loan repayment, lower collateral specific risks, secure and transferablecollateral) will also promote financial viability. Providing both savings and loan servicestogether would reduce borrower access costs, and allow savings to serve as a form of collateraland borrower information for lenders.