PORTFOLIO HEARING COMMITTEE
Presentation by: BANKSETA
It is my privilege this morning to give you an overview and a report on the status of the BANKSETA’s and micro finance skills project.
As I begin this report, I think it is important that we contextualise the project in the light of the BANKSETA’s mission, which is "To promote and give effect to legislation by establishing an education, training and development framework, to enable stakeholders to advance the national and global position of the banking sector".
The banking sector comprises of not only banks, but also a great many micro finance businesses, and in fact of our constituency over 1 200 are micro finance institutions and they therefore comprise a very important, and in fact the majority of stakeholders within the BANKSETA.
The need for the MFSP project
Why was there a need for a micro finance skills project?
In the first instance we perceived that there was a very definite lack of skills and professionalism within the industry, particularly amongst the employees of micro finance institutions, who are predominantly drawn from historically disadvantaged groups.
We also perceived that there was a lack of business knowledge which was inhibiting growth in the sector, and again that lack of knowledge was primarily found amongst the employees of micro finance institutions.
We were also aware that there was a need to provide training to consumers to improve the level of their knowledge in their dealings with micro financiers, and also to raise their level of financial literacy through training.
There was also a need for us to develop SMME entrepreneurs, many of whom are borrowers from micro finance institutions.
The micro finance skills project was set up in 2002. The micro finance sector provides services to small, medium and micro enterprises and to individuals. The micro finance sector bridges the gap between the traditional banking sector and the emerging market and for many years to come micro financiers will be one of the primary banking interfaces for many of those people who are currently unbanked to give them access to finance.
The project was to be a three year, three phase project which is funded by the National Skills Fund. We have taken a unique approach insofar as we are interfacing not only with micro finance institutions but also with their clients, be they individual borrowers or small businesses. In doing so we are recognising and enhancing the critical role that MFIs are playing in providing access to finance for the larger South African population.
I would like to show you now a short video clip which comes from a media interview that was done earlier on in the project and which outlines some of the project’s objectives.
So to reiterate from the video clip, the objectives of the project are to provide skills development opportunities for 1200 learners in micro finance institutions over a three year cycle between 2003 and 2004 and to provide training and development opportunities for 1200 SMME borrow enterprises, in other words, small businesses who are borrowers from micro finance institutions and then 6000 individual borrowers.
We have also set out to build the capacity of education and training service providers within all provinces to deliver our skills development initiatives, and in particular to develop HDI SMME providers to provide for this market.
Good governance and effective management have been key to the success of the project. The project is owned by, and overall responsibility for the project is taken by the BANKSETA, but in order to run the project effectively we brought together a project steering committee which comprised the major stakeholders within the industry.
The BANKSETA, the Banking Council, Organised Labour, the MLA which is the association of Micro Lenders, the MEA - the Micro Enterprise Alliance, and the Regulator for the Micro Finance Industry, MFRC - the Micro Finance Regulatory Council.
We also outsourced the project management to the SDS consortium. Now that consortium is comprised of two small businesses and one large - the Skills Framework, Deloitte and SAB&T - an HDI accounting firm.
The guiding principles that we followed were first of all to ensure the buy-in of all stakeholders, without doing this the project would not have been able to move forward.
The second key principle was that we would incorporate and support SMME and BEE contractors to deliver what was required within the project, and that there would also be a strong focus on thorough research in all phases of the project so that we could build a body of knowledge for both the industry and for the BANKSETA to take us into the future.
Research and Development
The research and development phase of the project ran between February 2002 and February 2003, and you can see from the illustration the various areas in which we had to work. First of all to research and develop the training that was needed, which incorporated the development of a complete curriculum, although at this stage we were only focussing on MFI training, and six modules were identified as being most important out of a very wide variety of training needs. So we were focussing on those issues which had emerged from the research as being most important.
We then also had to engage in the recruitment of training providers to look at the whole issue of business development support, to then look also at the issue of how learners would be selected, how learners would be supported and what assessment processes we would use to ensure that the learning had been absorbed by the learners and that application was taking place.
So, a very wide ranging and in fact a very lengthy process to determine that we were approaching the delivery side of the project in the most effective way, and that is why we spent the better part of a year in order to ensure that we provided quality training interventions.
The delivery targets that were set for the project were across three phases. The first phase was a pilot phase in which we only took training to micro finance institutions in three provinces, namely Gauteng, KwaZulu-Natal and Western Cape. And we targeted only 200 owner/managers and staff of micro finance institutions. We did this deliberately in order to test the validity of the training material, but perhaps more importantly - to find the best methodology for delivering training. The providers that were selected in the pilot phase came from a variety of backgrounds with different methodologies. We very quickly came to understand what would work and what would not work.
In phase 2 we extended to five provinces and increased the numbers, both of MFIs and now introduced SMME borrowers and individual borrowers. In phase 3 we then moved into all nine provinces with the balance of learners in each of the categories.
In order to access the MFIs we used a variety of different approaches to recruiting our learners, using print media, the electronic media and face to face interaction with the industry itself.
Of all these methodologies the most effective at the end of the day was to interact with the industry, to build a relationship with them and that would lead them to wish to nominate people to attend the training programmes, and then secondly the electronic media gave us a reach far in excess of the print media.
Accessing SMME and Individual Borrowers
In terms of accessing SMME and individual borrowers we followed a somewhat different approach by working not through the MFIs themselves, but rather through intermediaries, which included provincial consumer desks, advice centres, NGOs, churches and partnerships with the Ithala Finance Corporation in KwaZulu-Natal and SACCOL in the Western Cape.
We also used a variety of media and in order to access and encourage borrowers to participate directly, and having used those different approaches we have successfully been able to recruit the people that we needed.
I will now play you a sound byte from one of the recruitment radio adverts.
Pilot phase achievements
For the pilot phase we set out to train 200 learners from three provinces and you can see that we reached 277. It was a very slow start and we found initially that we were only training perhaps two or three people in a training course and we began to wonder whether this would be a successful project at all, but what was happening was the micro finance institutions were very cautious in their approach. They needed to establish for themselves that what we were offering was what they needed and that the quality of the training was going to make a difference to their staff. Within a matter of two weeks into the pilot phase the numbers increased dramatically and we were able, at the end of the phase, to exceed the target by 38.5%.
Delivery phases 2 & 3
Delivery phases 2 and 3 saw success in training not only micro finance institutions but also the SMME borrowers and individual borrowers. And here is a further video clip.
Overall phase 2 : MFI Training
So at the end of phase 2 for MFI training these were the overall results. We trained 1 423 staff from MFIs and you can see very clearly that the highest take up was in KwaZulu-Natal followed by Gauteng and the Eastern Province. We had, by the end of phase 2, exceeded the total number of MFIs to be trained for the project as a whole.
Overall Phase 2 : SMME Training
For SMME training we were well on target and in fact exceeded that target by 22%, and you can see that the number of learners was highest in KwaZulu-Natal with the Eastern Cape and Gauteng in second and third places. A very good take-up considering that we had moved into some new provinces that did not have the benefit of the pilot.
Overall Phase 2 : Individual borrower training
For individual borrower training in phase 2 again KwaZulu-Natal was very much to the forefront and we trained a total of 2650, exceeding that target by 20%.
Delivery phase 3 – to date
For delivery phase 3 to date, you will see that for MFIs we have trained 637 in excess of our original target, and in fact we went back to the Department of Labour to ask them to allow us to train additional numbers because the demand was so high and after a certain amount of negotiation they agreed to allow us to do so.
In hindsight we could have trained a great many more because the demand has been increasing exponentially as we have been going along, and certainly there is a basis here for future training.
For SMME borrowers, we have virtually reached that target, as we have for individual borrowers.
Now let us look very quickly at what we have offered to our learners for the micro finance institutions, the following modules:
Conduct market analysis
Develop repayment policies and procedures
Manage loan portfolios
Develop advanced client service skills
Market your product
Process a loan
Collect and administer loans
Help clients understand their rights and responsibilities
Build relationships with clients and
Basic business principles.
And here we see one of the training sessions in progress. As you can see from the photographs these are very interactive training sessions, not done on a conventional classroom basis at all, but drawing very much from the experience of the learners themselves and building their competence.
For the SMMEs, these were the modules which we have offered.
How do you know if your business idea would work?
what resources do you need to start your business?
what do you need to know about loans?
what you need to know about financial management to run your business?
how do you budget your finances effectively?
how do you draw up a business plan?
And here again one of the training sessions for SMMEs. Again highly interactive and we will show you the material at the end of the presentation.
Individual borrower modules
For individual borrowers the following modules:
You and your accounts
You and your budget
You and your debt
You and your loan - two modules
You and your savings
You and your rights.
These are very simple modules which take up no more than two to three hours each, but they do go to the heart of the very basic skills that are needed to manage personal finance effectively.
And again here are some photographs of individual borrower training sessions. Again you can see how very interactive and participative of these sessions are, which allow the individual to build their knowledge and skills by interacting in a safe environment.
MFI – lessons learned
First of all that there were no existing training interventions which had been developed specifically for the micro finance industry. We had, therefore, to create a new culture of training and learning within the industry, and this has been borne out, I think, by the response that we are having to the training, the further down the track we go the greater the demand and the greater the enthusiasm for the training.
Then secondly we had to develop specific methods of communication to target micro finance institutions and we found that one-on-one meetings were absolutely essential to sell the benefits of the project and we have had to constantly promote the project through telephone interaction with businesses.
We also very quickly came to an understanding that the project could not rely on existing industry associations to access the learners. We had to go directly to the micro finance institutions themselves.
But in order for us to access learners the business owners needed to have confidence that the BANKSETA and the training would benefit their businesses, and I think one of the successes that we have had is to build that confidence and the industry now looks to the SETA to be the prime mover in generating training and development within the industry.
Proof of tangible benefits. Word of mouth was absolutely critical to our success. A micro lender would send their staff or attend themselves, and would then tell their peers and their colleagues how good the training was and then we would attract additional participants.
Consultative forums became contact sessions, initially we set out merely to tell the industry in the different provinces what we were doing, but very quickly came to understand that we needed to have them as partners. The contact sessions with very active debates became the order of the day and we learnt many hard lessons in our relationship with the industry.
The result of all that is that the MFIs now have a very real interest in the project and people attend the contact sessions again and again.
We came to understand that the approach to training had to be very different to that in other types of businesses, that there were many days and dates within a month that we could not train and in consequence we had to become very flexible.
We also came to recognise that the micro finance institutions have different training needs and that the industry is not necessarily a homogenous one. The curriculum needed to be impactful and target different size MFIs and staff levels and we needed to focus on front office, back office and managers and to split those groups for training.
We also came to understand very early on in the project that the micro finance institutions needed support to select and register their learners. Because of the disparity of learning experience within a particular business, owner/managers were not necessarily sure who to send to what course and we spent a great deal of time counselling them over the phone to enable them to select the right people to attend.
We also had to be very innovative in determining how we would assess learners. The conventional processes produce lengthy portfolios of evidence and that was not necessarily going to work within this industry, particularly for the very small businesses and we have had to go through an extensive education process and to devise assessment processes that can be done primarily through telephone contact but at the same time without undermining the integrity of the assessment process.
SMME borrowers – lessons learned
For the SMME borrowers, some of the lessons that we have learnt are:
First it is difficult to assess the correct level of SMMEs and to match training materials to their levels. There is such a disparity amongst SMMEs from those who are survivalist traders to those who have small manufacturing businesses, yet they all fall into the same grouping and there were many difficulties in providing learning within groups that were very disparate.
We also found that there is a very informal approach to learning because a learning culture does not really exist, so people would arrive late which was a major challenge for the facilitators.
Because of the quality of the training word of mouth amongst communities led to some very big numbers attending workshops where an individual who signed up to attend the training would bring a friend or two and we would find that where we were expecting 15 people for a workshop we would have 40, which again is very challenging for facilitators.
The need to have a certain amount of structure and to identify the people attending did create some suspicion in some communities, particularly where we asked for identity numbers in order to be able to report properly to the Department of Labour and again we had to go through an education process.
There was a need to follow up individuals rather than being able to follow up organisations and this was far more time consuming than we had first thought.
For SMMEs we quickly came to the conclusion, and adjusted our strategy accordingly, that it is better to reach SMMEs through NGOs, Provincial Advice Centres and Consumer Affairs Offices rather than trying to contact them directly.
The market is extremely fragmented and this does create some difficulties but I think the approach that we have adopted has proved that by using the right intermediaries we can access those with the greatest needs.
Individual borrowers - lessons learned
For individual borrowers some of the lessons that we have learnt are that it is certainly also the best way to reach communities through community based organisations.
We identified intermediaries, Consumer Affairs Offices etc and we have trained their staff to deliver the training material on our behalf. So effectively we have built capacity within the Provincial Advice Centres, Consumer Affairs Offices and NGOs and they will be able to continue the training long after the formal project is finished.
We also had to setup a support system in order to ensure quality and to be able to monitor the quality of the training that was delivered through provincial intermediaries and that has worked very well.
An intermediary incentive strategy for individual consumer borrowers was introduced so that the facilitators within provinces were encouraged to reach as many borrowers as possible.
The intermediaries in fact compete against each other in provinces and provinces themselves compete against each other and we provided prizes at the end of each phase.
The number of people who have accessed training for the first time in their lives is very significant and we are very proud of the number of particularly historically disadvantaged individuals who have been able to access training. Often the first training they have had since they left school.
We have introduced a training and staff development culture into the micro finance industry and if we think back to one of the original objectives of the project to raise the levels of professionalism, this is certainly occurring through establishing both a training and a development culture.
Industry players have begun to collaborate on issues of common interest, particularly the development of staff, where previously industry players would not talk to each other. They are now becoming comfortable exploring the different issues that affect them, which has an immediate benefit for the industry as a whole.
There are now service providers who know the industry and focus on the best possible ways to deliver training to the industry. These did not exist previously, other than in a very generic form and we are now able to target training and development very accurately.
Industry training needs have been exposed and appropriate training material developed which can be used beyond 2004. There are now trained assessors and quality assurance measures in place to ensure that the level and quality of training is maintained. Those trained assessors will be able to continue this process into the future.
All of the above are indications of a professional and sustainable learning culture which is starting to develop. Clearly we have not reached all the players within the industry, which is a huge industry, but we have laid a very solid foundation.
MFI Training statistics and demographics
And now some of the training statistics and demographic breakdowns. You will see immediately that the primary beneficiaries of the training and development have been African male and female employees within the industry and particularly
Accomplishments : SMME and Individual Borrowers
And now the accomplishments for SMME and individual borrowers. Certainly the building of capacity amongst consumer affairs office, NGO and advice centres has been a key accomplishment and having trained their staff to be the trainers has enabled them to provide a more comprehensive and better service to the consumers that they serve.
The project has built partnerships with both ITHALA and SACCOL. We have developed appropriate training material which both the trainers and the individuals find to be of great benefit. We have established a provincial reach in all nine provinces and I think that is certainly a major accomplishment, particularly in those regions that are at a distance from the main centres.
We have been able to put in place quality assurance and support and the response that we have experienced has revealed a real need for this type of training in communities, and it is amazing that we have been able to reach communities in rural areas as well as in townships and in schools, areas that we never believed, when we set out to develop this project, we would ever be able reach those communities effectively.
SMME Borrower statistics and demographics
In terms of the SMME borrowers: the statistics to date and the demographic breakdown. Again you will see that in phases 2 and 3 the primary beneficiaries have been African males and African females, and it is perhaps a little disappointing that some of the other groupings have not taken up the opportunity to the same extent.
Individual borrower statistics and demographics
The individual borrower statistics and again the demographic breakdown. Again a very clear picture that the primary beneficiaries in the two phases where we delivered individual borrower training are primarily the African male and African female groups.
A very short video clip, which came from the Enterprise Zone TV programme and which deals with a student who owns her own business.
Interest from other parties
When we set out to do the primary research for the project, one of the things that we did was to visit micro finance institutions, donors and industry stakeholders in Uganda and Kenya in order to make sure that we did not duplicate things which had already been researched and established. One of the things which we were told whilst we were there is that it was impossible to have a project which dealt with micro finance lenders and also SMME and individual borrowers and that we are really biting off more than we could chew.
Two weeks ago we were visited by the Micro Finance Outreach Plan, a Uganda Government initiative who came to visit the project to learn how to manage simultaneous training for MFIs, SMME and individual borrowers. They originally came for a three-day stay, but decided to stay for four days because they were learning so much from this project.
Consumer desks have commended the training material and have expressed a strong desire to use the material developed by the project beyond 2004 and we will look for ways to enable them to do so.
Procurement and contracts
In terms of procurement and the contracts that have been awarded, and you will remember earlier on in the presentation I told you that one of the objectives was to enable SMME and HDI training providers through the project. We have awarded in total 71 contracts. Of those 71, 54 have been awarded to HDI organisations, that is 76%. 17 contracts have gone to non-HDI organisations, eight contracts to non-SMME and 63 contracts awarded to SMMEs, that is 88.7 of the total allocations.
On the financial side 52.8% of the value has gone to HDIs but 93.7% to SMMEs. Although it is slightly disappointing that only 52.8% has gone to HDIs, that has been the product of the need to build capacity through the project and in some areas the required expertise was not available, but that expertise, through the project has now increased.
Service Provider Support Centre
In order to grow the capacity of our HDI / SMME providers we introduced the concept of a service provider support centre and were able to provide comprehensive support to them through monthly meetings. We orientated all new providers and that orientation went right back to the procurement process where we assisted small businesses to put in appropriate tenders to draw up project plans and budgets so that they would be able to compete.
We also undertook to coach them so that they could become assessors and moderators. We provided them with venue databases and various checklists. We have helped them to gain accreditation as formal providers with both the BANKSETA and other SETAs. We have enabled them through a very high level of quality assurance and constant feedback on their performance. We have frequently provided them with training tips and in total have trained 52 assessors from these small businesses.
We have also trained all the trainers in these businesses in new methodologies which they use for delivering our training modules, but we have also seen them adopting these new methodologies in delivering their own training material. This has enabled them to compete at a far higher level in the open market and I think it has to be emphasised here that support to SMME / HDI providers is absolutely essential if we are to achieve effective black economic empowerment and it is an issue which required a great deal of time and effort, but at the end of the day it has been highly successful.
Business Networking Sessions
Within the project initially we looked at providing business development support. This was a difficult area and our initial thoughts were that, through the research that was conducted, we should create a nationwide incubator which would allow small business access to shared services through a call centre. This unfortunately was somewhat distant from the reality of the industry.
We assumed that people would know what they needed, but in fact in many instances they did not. The research results showed that we would have to change our approach, and business development support became business networking sessions. So moving away from putting in a fixed structure to a rather more flexible approach and so the assumptions that we made on the left hand side of this slide were BDS with shared services and call centre and the assumption that SMMEs knew what they needed, that they are sophisticated and would have access to the Internet.
This would have been a high cost infrastructure which could not be supported by the industry and we that decided this was not the right way to go. Our thinking then changed to business networking sessions which were one-on-one and group interactions, enabling people to build networks amongst themselves and also providing coaching.
Number of BNS beneficiaries
The number of people who participated was in fact comparatively small and as you can see here, we only took this to five provinces and amongst the MFIs only 60 took up the offer and we found that predominantly those were MFI business
that were mature and tended to be the larger organisations who had reached the point in their business life cycle where they had plateaued and needed to rethink their strategies. Many of those who participated in BNS had not participated in the project training.
On the other hand the SMMEs came in far greater numbers than we had anticipated, but were predominantly looking not for business support in the way that we had understood it but rather looking for access to finance, looking for how to put together a business plan to present to a bank and this was not quite what we had wished to undertake and we did not continue this beyond the second phase because it needs a great deal more work to become really effective.
And now let us turn our attention to the finances of the project. We were allocated R78 million by the National Skills Authority and you can see here that there are some areas in which we have spent a great deal of the budget and others where we have substantially under spent.
The most important area is that of the MFI training delivery where we will have spent 99.6% of the budget and that is as it should be. We have spent two thirds of the SMME and individual borrower training delivery budget, which is the direct result of our using intermediaries rather than delivering directly to the borrowers.
We did not know when we set out with this project precisely how we were going to deliver and therefore the budget was not entirely accurate.
The business development support centre. Here we are greatly under spent and I have previously discussed the reasons why we did not carry BDS forward. So the largest saving within the project has come from that area because we were not comfortable in terms of how we would deliver.
Learner assessment: We have under spent by about 30% and that is the result of having to devise very effective methods of assessment that were less labour intensive than we would have thought at the outset.
Project evaluation: Again about 43% under spent. We have adopted a rather different approach to project evaluation. We have not engaged in nationwide group evaluations. The project has commissioned Ebony Consulting International to do this and they will visit the different regions, the MFIs, SMME and intermediaries to complete a comprehensive evaluation.
The service provider support centre is fairly close to budget. This has been money which has been extraordinarily well spent and I think the return on that investment has been exceptional.
Curriculum revision: MFI and borrower materials. This is very close to budget and a great deal of work went into the process of constant revision throughout the project to ensure that we were delivering the best possible product to our learners.
Other activities: Procurement, product design and review. Again we are somewhat under spent here as we have incorporated project design review into the ongoing curriculum revision. The procurement process whilst very rigorous was not as costly as we expected.
Summary of finances
Total expenditure for curriculum development, skills transfer and BDS will come in at 50,4% of the budget.
In terms of marketing we would have spent 75% of the budget, having worked very effectively with Kagiso Marketing Communications.
The costs for project and financial management are within budget and we have still to spend some money on the final external and internal audits.
Now in terms of the total project against the 76.8 million we will have spent 57.2% and will return the projected saving will R32 853 855, that is 42.8% and this amount will be returned to the NSA.
I think that at the end of the day the BANKSETA Micro finance Skills Project has over-delivered in terms of the training to the different constituencies whilst coming in considerably under budget and the project will have been completed within the planned time frames.
So in conclusion, I think we can say that the project has been highly successful. We have developed high quality training material that has been accepted not only by the micro finance industry, but also by the SMMEs and the individual borrowers.
We have delivered to all the stakeholders as we planned to do and in every area we have over delivered. The industry response has exceeded our expectations. We knew that it would be difficult as we set out, but the acceptance that we have received has been phenomenal.
I think that the success of this project serves to demonstrate that a SETA working in partnership with stakeholders can achieve what it is mandated by the Skills development Act to achieve. The intermediary and partnership strategy has paid off with the provincial offices and also with ITHALA and SACCOL in order to reach beneficiaries who would not ordinarily be reached.
The project management that was outsourced to the SDS Consortium has delivered to its targets in time and under budget.
We have received very good media exposure for the project, whether that is through the electronic media or the print media, and although it is always difficult to get the media to publicise "good news" stories. We have had some good successes there.
The procurement strategy to select and empower SMME and HDI providers was difficult but it has paid huge dividends and I think constitutes a model that could be used advantageously by other SETAs and by business.
But most important of all, the objectives of the Skills Development Act have been achieved for the micro finance industry and its customers.
I thank you for the time that you have given us this morning and I look forward to your questions.
* * * * * * * *