The National Credit Act: Will it increase access to credit for small and micro enterprises?

Abstract

Pamhidzai Bamu, Joachim Schuckman and Shane Godfrey deal with the question whether the new National Credit Act will increase access to credit for small and micro enterprises (SMMEs). Government sees the promotion of SMMEs as a way of mobilising the so-called "second economy", comprising mostly actors from the "previously disadvantaged sector", to move closer to the "first economy". Access to finance is seen as one of the most important factors that hamper SMMEs' potential to succeed. The previous regulatory framework for the microfinance sector had been provided by the Usury Act of 1968. In the view of the authors, this framework had failed to provide a platform for the development of SMMEs. During the 1990s it became increasingly evident that a new regulatory framework was needed, and in 2005 the National Credit Act was passed. While acknowledging the importance of the Act, the authors suggest that the barriers to lending to unbanked SMMEs cannot be fully addressed by credit policy alone. To ensure that developmental credit gets the attention that it needs, they argue, will require a more holistic and more interventionist approach on the part of government.