Milford BatemanFreelance ConsultantContributeur principal
African Bank (ABIL) in South Africa is famous (along with Capitec Bank) for having pioneered the mass provision of unsecured microloans to the country’s poor. It was widely celebrated in the early 2000s for having done so much to promote ‘financial inclusion’ among the poorest black communities and for having made a microcredit available to anyone who wanted one (or two or three…). But being profit-driven adn effectively controlled by senior managers, the inevitable tendency was to push out far more microcredit than could be productively used by the poor, resulting in the massive overindebtedness we see today in South Africa. But the CEO and senior managers all got rich by adopting such a tactic, so they were quite sanguine about the results in the community. Today, African Bank collapsed. The South African government has quickly stepped in and it will use taxpayer funds to rescue what it can. See the report by CNBC,
The South African government is hoping that this will not mean further damage to the financial sector as a result of its the overlending of its once celebrated microcredit banks, but no-one is sure what will happen next. Scary times and one of the clearest signs to date that South Africa’s microcredit sector has been a disaster in the post-apartheid era. Sadly, the biggest loser could be South African pension fund – Public Investment Corp – that holds a large stake in African Bank, now worth a lot less than it was last yeaar.
Nadine Hutton | Bloomberg | Getty Images « This is something that is not done lightly, » central bank governor Gill Marcus told a news conference. « There is a private (and) public sector responsibility, given the nature of African Bank and its…