South African Micro-finance Apex Fund samaf ANNUAL REPORT 2009/10 1.

South African Micro-finance Apex FundSouth African Micro-finance Apex Fund sasamafmaf

ANNUAL REPORTANNUAL REPORT2009/102009/10

11

ContentsContents

22

Mandate

Vision, Mission & Values

Products and Services

Auditor General Report

What has samaf done since inception

2009/10 Performance

2009/10 Financial Performance

Human Resources Report

Effective Use of New Technology

Supply Chain Management

Corporate Governance

Challenges

MandateMandate

33

Contribute to Government’s poverty reduction goals by acting as a catalyst for the development of an effective micro-finance sector through:

Support for the establishment of sustainable micro-finance institutions that can reach deeper and broader to the enterprising poor;

Facilitating the establishment of an enabling environment for effective financial intermediation and facilitation of working markets for the enterprising poor; and

Building a strong, effective and efficient Apex Fund.

VisionVision

44

Active participation of enterprising poor in economic activities is robust and bears fruit;

Reduction of financial troughs for a better livelihood;

Sustainable Financial Intermediaries (FIs);

Adoption of best practise models;

Competent employees;

Utilisation of systems in delivery of services; and

A financially sustainable samaf

samaf envisions a country in which a network of sustainable micro-finance institutions

broadens and deepens access to affordable financial services by the enterprising poor.

This is achieved when:

MissionMission

55

Provide developmental financial and non-financial services to FI’s (MFI’s & FSC’s) through:

The effective mobilisation and wholesaling of capital for micro-finance institutions with proven potential;

The development of human capital in the economic environment through capacity building and institutional development;

Contribute to policy development with respect to micro-finance to inform and support samaf staff, its partners, and stakeholders; and

The development of valuable partnerships between business, Government and the community.

ValuesValues

66

The following values will underscore samaf’s behaviour as it strives towards the achievement of its mandate, vision and mission:

Integrity - Dealing with stakeholders in an honest and ethical manner;

Transparency - Ensuring compliance to best practice on the dissemination and sharing of information with all stakeholders and consult with them to ensure comprehensiveness and buy-in to samaf activities;

Professionalism - Adhere to specific defined norms and setting standards of workmanship, respect, and communication;

Accountability - Taking responsibility for the decisions and actions, including allocation of powers and duties; and

High Performance - Excellent performance and satisfied customers that guarantee long term sustainability of the South African Micro-Finance Apex Fund.

Products and ServicesProducts and Services

77

samaf offers three main products and services namely Financial Services ,Technical

Support and FSC Supervision.

Financial Services:

Loans - samaf can provide loans to a maximum of R10 million to its FIs, who in

turn can provide loans to its clients up to a maximum of R10 000.

Capacity building - the following are the capacity building interventions that

samaf offer:

Loan linked grant: MFI’s receive a maximum of 50% of the total loan

amount approved whilst FSCs receive a maximum of 170% of the loan

approved.

R200 000 grant: This grant is not linked to the loan and is given to FSCs

that are still to be capacitated in terms of training and operational costs.

Technical support: samaf staff provide technical support such as the development

of operational policy documents, training of FSCs, etc.

FSC Supervision: samaf is mandated to regulate and supervise all FSCs in South

Africa in terms of Exemption Notice 887 of the Banks Act.

Auditor General ReportAuditor General Report

8

Basis for qualified opinion

A number of journals were passed during the system implementation process.

Management failed to provide sufficient and appropriate explanation to substantiate

journals.

Emphasis of matter

Auditor General opinion is not modified in respect of the following matters:

Restatement of corresponding figures

Irregular expenditure

Material impairments

Non-consolidation of controlled Financial Intermediaries

Auditor General Report - continuedAuditor General Report - continued

9

Report on other Legal and Regulatory Requirements:

The following findings were issued:

Non-Compliance with regulatory and reporting requirements

Lack of effective, efficient and transparent systems and internal controls

regarding performance management.

Usefulness of reported information.

Changes to planned performance information not approved.

Planned and reported performance targets not verifiable.

Reliability of reported Information.

Reported targets not valid, accurate ad complete as inadequate supporting

source information was provided.

1010

Despite not having a local benchmarking model, the entity has to date built a network of 51 FI’s, directly benefiting 35 844 very small survivalist entrepreneurs with total loans of R49,8m.

samaf has spent R26.3m in grant support to build the capacity of the FIs which extend services to poor communities through their lending and savings mobilisation programmes.

An infrastructure network has been established through samaf’s nine (9) provincial offices.

samaf employs 61 people, of whom 34 are deployed in provinces.

What has samaf done since inceptionWhat has samaf done since inception

1111

2009/10 Performance2009/10 PerformanceMEASURE TARGET ACTUAL REASON FOR VARIANCE

MFIs supported 8 11

FSCs supported 10 4 Required standards not met first time

No. of end users 3 120 6 170

Household Impact 15 600 30 850

End-user women profile 67% 86%

End-user rural profile 50% 75%

End-user semi-urban profile 50% 25%

Loan utilisation

Enterprise

Housing

Education

40%

25%

35%

75%

15%

10%

FI loan repayment rate 50% 92%

1212

Demographic Split

2009/10 Performance2009/10 Performance

1313


No. of active savers 2 345 8 585

Total savings book R3,9m R3,4m Recession is possible reason

End User satisfaction 50% 50%

Stakeholder satisfaction 60% 60%

Customer retention 10% 60%

Client complaints 60% 60%

Profile of services consumed

Loans

Grants/CapacityBuilding

Savings Mobilisation/RRS

40%

50%

10%

68%

31%

1%

FIs did not meet standards

Target reviewed during mid yr

Loans disbursed R20m R13,1mNon-compliance with standards

Grants disbursed R10m R6,3m

1414

Yearly Performance ComparisonYearly Performance Comparison

1515

Disbursements - Provincial Split (R’m) as at 31 March 2010

2009/10 Performance by Province 2009/10 Performance by Province

1616

2009/10 Performance2009/10 Performance

1717


% improvement of FIs from baseline 20% 5% Target removed during mid yr review

Stakeholder brand awareness 50% 40%

FI improve - service delivery quality 50% 40%

No. of accredited FSCs 60% 82%

Cost per rand disbursed Dev tool None Financial system delayed

% of services within agreed turnaround times

60% 30% FIs not meeting standards

Review Credit Policy 100% 100%

Implementation of Credit Policy 100% 40% Policy implemented late in F/Y

Credit Policy fully implemented 60% 100%

Implement due diligence 40% 100%

1818


Approval of revised org. Structure Approved Proposed Deferred to new dept for approval

Capacity building on:

Financial systems & controls

FI risk management

Loan monitoring & tech support

60%

60%

60%

55%

80%

60%

New system implemented

Institutional capacity a challenge

Work skills plan 100% 100%

Succession plan 100% Policy done Implementation takes longer

Employee satisfaction rating index 20% 70% Complaints hampering progress

% units comply to perform management

100% 61%94% contracted on time, 61% half yr review done on time.

Budget variance 20% 37%FIs did not meet requirements

Total operating cost to total budget 100% 94%

Cost to income ratio 58% 54%

1919


Portfolio at risk 40% 31%

% write off 50% 17%

% attendance @ advisory board meetings

100% 25% Resulted in lack of quorum

Corporate audit qualificationTechnical

qualificationAccounting

qualification

Due to improper management of implementation of new accounting system

2020

2009/10 Financial Performance2009/10 Financial PerformanceStatement of Comprehensive Income

2121

2009/10 Financial Performance2009/10 Financial Performance

2222


2323



24

(R)(R)

Human Resources ReportHuman Resources Report

25

Training and DevelopmentOne Senior Manager and eight (8) Outreach Coordinators were identified to go on a Micro-finance Course at the University of Pretoria

Staff Turnover RateThe staff turnover rate for the year ended 31 March 2010 was 1.3%.

Human Resources Report - continuedHuman Resources Report - continued

26

Financial Misconduct

Disciplinary action is being taken against those found guilty of Financial Misconduct.

Project Bokamoso

The project was commissioned to map a clear strategy in order to shape the

organizational culture into performance driven environment. The project was

structured to address samaf challenges through five work streams as follows:

Organizational design and structure;

Balanced scorecard;

Talent Management;

Performance Management; and

Change Management

Effective Use of New TechnologyEffective Use of New Technology

27

Upgrade of Productivity Tools

The following productivity tools were implemented during the period under review:

Microsoft Office 2007

Symantec Anti-Virus

Symantec Back-Up Exec

ERP Implementation

A project was initiated to implement a ERP system with the following modules:

AccPac – Financial Management

Assetware – Asset Management

VRM – Vendor Relationship Management

eWorkflow – Automation of Procurement Process

Only AccPac was implemented during the year under review

Supply Chain ManagementSupply Chain Management

28

The supply chain management process performed satisfactorily. There were deviations from the policy and procedure by samaf officials.

Corporate GovernanceCorporate Governance

29

There has been steady progress in the refinement and improvement of corporate governance at samaf, particularly with respect to the operations of the key governance structures.

Name of CommitteeDate

EstablishedNo of

Meetings

Members

Executive IndependentAdvisory Board October 2007 4 5 9Audit Committee June 2007 3 5 4Credit Committee December 2006 4 5 3Risk Management Committee February 2008 2 3 0Rules, Registration, Supervision & Stabilisation Committee(RRSS) August 2008 10 5 6Executive Committee (EXCO) April 2007 6 5 0Tender/Bidding Committee June 2007 1 3 3

Internal Audit Function Outsourced to GFIA (Gobodo Forensic Investigation Accountants)

ChallengesChallenges

30

Appropriate skills, leadership & accountability at senior levels within

samaf

Lack of skills within the micro-finance sector

Sustainability of FI’s (MFI’s & FSC’s)

Turnaround times

Cumbersome systems & processes

Ineffective reporting & performance management systems

Profit margin for start-ups is small.

Deposit taking insurance – samaf FSC’s not covered in terms of the

Bank Insurance Act.

Challenges in Provinces due to socio-economic conditions.

AcronymsAcronyms

3131

Acronym Definitionthe dti The Department of Trade and IndustryEDD Economic Development DepartmentEXCO Executive CommitteeFSC Financial Services Co-operativesMFI Micro-finance InstitutionRRSS Registration, Regulation, Supervision and StabilisationFI Financial IntermediaryGFIA Gobodo Forensic Investigation AccountantsPFMA Public Finance Management ActPAR Portfolio at risksamaf South African Micro-finance Apex FundSMS Senior Management Service

3232

Thank You

South African Micro-finance Apex Fund samaf ANNUAL REPORT 2009/10 1.

Documents

nonfinancial services

affordable financial

effective microfinance

loans samaf

delivery of services

samaf offer

support samaf staff

maximum of r10