1. Portfolio Committee Meeting APEX Micro Finance 18th November 2004

2. Background and Context After seven years of operations, government believes that the mandate given to Khula, that is, to provide loans to institutions serving the SMME sector was too broad. The DTI and the South African National Treasury (SANT) are now looking at an Apex organization that will only focus on supporting micro finance institutions servicing poor clients with financial needs not exceeding R10, 000.This followed and announcement by the President in the 2001 State of Nation Address where he indicated that government will mobilse micro-finance for productive purposes and to promote entrepreneurship.

3. Vision To become an effective micro finance facilitator in South Africa

4. Mission "The Micro Finance Apex Fund provides professional and customised services to partnership organisations, by means of savings mobilisation, on lending capital, capacity building, providing operational support to micro finance institutions which will broaden access to financial services to the poor and which will facilitate their participation in productive economic activities"

5. Core Business Financial intermediation Development of sustainable micro finance institutions that can reach the poor in their areas of operation Facilitation of training for micro entrepreneurs and financial cooperatives clients Capacity building for financial services cooperatives to enhance their ability to grow and manage micro finance products as well as innovations into micro insurance capacity building for enhancing institutional capacity of APEX and its POs

6. Products and Services Seed Funds from the government will be the first source of Funds The Apex will deliver –Operational support –Capacity building support –On-lending products to the partner organisations that meet the criteria set by the Fund

7. Structure Legal Structure Proposed structure for the Apex will be a private company with government as sole shareholder Governance Structure the DTI as the principals have appointed a Steering Committee to oversee the registration and institutionalization of the project A Board of Directors at incorporation will replace the Steering Committee

8. Capacity Building Support Capacity building support will be offered at four levels: –Institutional –Human Resources Development –Client development –Pioneer support

9. On-lending Funds The Apex will function as a wholesale source of Funds for partner organisations. The Fund will use two instruments to on-lend to its clients: –Poverty Alleviation Fund –Micro Credit Fund

10. Target Market The target market of the Apex is MFIs targeting clients whose financial needs do not exceed - RI 0,000 The key clients of the MFIs should be: –Economically active poor households whose livelihood is depended on the micro enterprise incomes

11. Progress to Date The Project is on track Steering Committee Fully Functioning Project Manager appointed and finalizing Operational Manual Consultation with potential partner organizations R5,7m budget transferred to Khula Operational systems have been set up Incubation at Khula working well Registration being finalized Open for business by 8 December 2004

12. Challenges in Implementation Developmental Micro Finance still at early stages in South Africa A phased approach will be followed to incorporate ongoing learning Difficulty to balance sustainability and impact in terms of outreach