Financial Management and Access to Credit

Most of the HiH members who complete the enterprise development module are motivated to start new enterprises or enhance existing ones. A majority of these members however are constrained by lack of capital to start or enhance the enterprises. For some beneficiaries, access to the internal group savings is enough to meet their needs, but the majority will over time need access to additional finance. In an effort to overcome the financial challenge facing its members, HiH identified two approaches through which its members can access credit.

The first approach is the HiH Enterprise Incubation Fund (EIF) which is designed to benefit members who require credit of up to R6, 000 to start or enhance their enterprises. The EIF will serve those group members who are not yet eligible for the more formal credit solutions in the market, given that they have no business track record, no credit history and/or no assets and collateral. The EIF fills a market gap by providing the initial catalytic capital to these beneficiaries provided they have successfully completed the training modules and demonstrated entrepreneurial spirit, trustworthiness, strong work ethic and a sound business plan.

The second approach through which HiH SA facilitates access to credit is through establishment of partnerships with other microfinance providers. This approach is aimed at providing on-going access to credit and credits of larger amounts to members whose financial requirements are more than the R6,000 provided by the EIF. These partnerships provide a transition and exit for members initially supported through the EIFs.

The aim of the HiH SA Financial Management training is to ensure that members understand credit management and other aspects relating to proper accountability and budgeting of their finances.

The two approaches through which HiH SA provides and facilitates credit to its members are discussed in detail here below: 

HiH SA Enterprise Incubation Fund (EIF) 

The HiH SA Enterprise Incubation Fund (EIF) as explained above is an internal fund designed to stimulate creation of new enterprises or enhancement of existing enterprises for HiH SA members upon completion of enterprise development training. EIF benefits members who require small amounts of loans as start-up capital. The EIF funds revolve and administrative costs will be covered by fees and interest rates charged on loans enabling the EIF to become financially sustainable.

The lending procedures for the EIF adopt the group guarantee methodology whereby members of a group co-guarantee each other. The objective of using this methodology is to ensure high repayment rate. HiH SA members are eligible to apply for the EIF loans for purposes that include:

  • Enterprise start-up
  • Enterprise development
  • Enterprise asset financing
  • Agricultural financing

Partnering with existing Microfinance providers

The second approach through which HiH SA provides microfinance services to its members is by fostering partnerships and collaborations with other existing microfinance providers. HiH SA identifies and approaches institutions that have loan products that are suitable and affordable to its members. Upon agreeing on a mutual relationship, HiH SA recommends members for loans to the institutions and subsequently the microfinance institutions refer their clients to HiH SA for any additional training that may be required.