Get Ahead Foundation credit programs in South Africa : final evaluation

GAF was the first PVO to introduce group lending for microenterprises into the black townships in South Africa, which it did with financial and technical support from USAID. It was also the first PVO to carry out such a program on a significant scale anywhere in Sub-Saharan Africa. For most of its history, GAF has operated in an environment hostile to its aims. When the Stokvel Loan Program began, many of its features, such as the interest rate, were illegal and brought regular harassment from government authorities. The black enterprises that GAF hoped to promote were also illegal and the target of official harassment. The townships in which GAF operates were highly politicized, often violent settings. GAF leadership and staff showed courage and ingenuity in carrying out the terms agreed to with USAID. Against this background, GAF has accomplished a great deal over the past five years. Under the Stokvel Loan Program, it has disbursed 12,658 loans in 22 areas throughout South Africa with a 90% recovery rate. This exceeds the performance targets established in the original grant agreement of 7,000 loans and an 85% recovery rate. The loans have contributed to improvements in the financial status of client enterprises and to increases in employment. Institutionally, GAF has strengthened its organizational structure by separating its social and commercial activities, trained staff in credit delivery and administration, and expanded its resource base. As the first agreement between GAF and USAID draws to a close, the stance of government toward black enterprise and black-directed PVO's has become more positive. Moreover, there is a tremendous surge of interest by PVO's, development finance institutions, and banks in providing financial services to the majority population. New entrants into the microenterprise finance field are appearing, and many of them have learned from the example of GAF that group lending can succeed in South Africa. Similarly, GAF has influenced organizations elsewhere in Africa to consider group lending. In the context of these changes, GAF can expect to achieve even more in the future. In doing so, however, it will face new organizational challenges. It will have to establish more ambitious goals and targets for portfolio quality, good management and, ultimately, financial independence. Now that the authorities are no longer working against it, GAF has more freedom to concentrate its energies on improving quality. It can shift into higher gear. The evaluation team recommends that USAID continue to fund GAF to promote its future growth, stability, and financial independence. To this end, GAF will need to introduce new performance indicators and aim for higher standards in critical management areas and in the quality of its loan portfolio to reduce the portion of loans currently at risk. The first and most important step is for GAF to make some immediate changes to improve loan repayment rates. The next round of funding should be contingent on the initial demonstration of commitment during the next few months. The new agreement should support GAF through a consolidation phase before substantial growth funding is made available. Movement from the consolidation phase to the growth phase should be based on GAF achievement of performance targets in management systems, financial management, and portfolio quality. (Author abstract)