MICROCAPITAL BRIEF: South Africa’s Futuregrowth Asset Management to Curtail Investments in Microlenders Distributing “Unsecured” Loans

Futuregrowth Asset Management, a South-Africa based investment company, recently announced that it will curtail its investments in microlenders that advance “unsecure” loans without collateral, which allegedly often results in borrowers receiving loans that they are unable to repay [1]. The reduction in investments to these lenders aims to prevent a potential microcredit crisis that could be caused by borrower over-indebtedness augmented by a lack of jobs.

Futuregrowth Asset Management CEO Mr Andrew Canter reportedly called attention to the “behavioral problems” of lenders that give loans to clients who cannot afford them: “The industry seems to be pumping debt down peoples’ throats. It is no longer socially responsible and does not belong in developmental funds [1].” As a result of such practices in South Africa, Futuregrowth intends to decrease its exposure to bonds issued by microlenders by not reinvesting in lenders that don’t disburse loans responsibly. Futuregrowth reportedly stated that it will consider investing in MFIs in the future, but only if the industry improves its lending practices and creates lending products that are more sustainable.

The same week that Futuregrowth announced its decision, Dr Muhammad Yunus, the founder of Bangladesh-based Grameen Bank, reportedly issued a warning about the potential for “abusive” lending behavior by microlenders who grant credit to already indebted borrowers, particularly those who disburse consumption credit used for financing clients’ personal activities [1].

Futuregrowth functions under Old Mutual Investment Group SA as a separately operating asset management company. Financial data for Futuregrowth is not available.

By Anesa Kratovac, Research Associate

About Futuregrowth Asset Management

Futuregrowth Asset Management is a privately owned investment manager based in South Africa. It launches and manages equity, fixed income, and balanced mutual funds and hedge funds for its clients and invests in the public equity and fixed income markets of South Africa. The firm primarily provides its services to individuals. Futuregrowth Asset Management operates as a subsidiary of Old Mutual Asset Management US. The company does not report its financial information.

Additional Sources and Resources:

[1] Business Day Live Article, “New blow for microlenders,” http://www.bdlive.co.za/business/financial/2013/10/06/new-blow-for-microlenders

MicroCapital Article, September 29, 2013, “Microfinance Companies in Ghana Allegedly ‘Reaping Heavily’ from Small Businesses via High Interest Rates,” https://www.microcapital.org/microcapital-brief-microfinance-companies-in-ghana-allegedly-reaping-heavily-from-small-businesses-via-high-interest-rates/

MicroCapital Article, August 22, 2013, “Thirty Microfinance Institutions (MFIs) Close in Ghana,” https://www.microcapital.org/microcapital-brief-thirty-microfinance-institutions-mfis-close-in-ghana/

MicroCapital Article, August 2, 2013, “33 Microfinance Institutions Close Down in Cameroon,”https://www.microcapital.org/microcapital-brief-33-microfinance-institutions-close-down-in-cameroon/

MicroCapital Article, July 30, 2013, “Government of Sri Lanka Proposes Long-Delayed Regulations for Microfinance Institutions (MFIs),” https://www.microcapital.org/microcapital-brief-government-of-sri-lanka-proposes-regulations-for-microfinance-institutions-mfis/

MicroCapital Article, May 17, 2013, “Bank of Ghana Grants Licenses to 171 Financial Institutions as 116 Fraud Cases Involving Unlicensed Institutions are Pending,” https://www.microcapital.org/microcapital-brief-bank-of-ghana-grants-licenses-to-171-financial-institutions-as-116-fraud-cases-involving-unlicensed-institutions-are-pending/

MicroCapital Universe Profile: Futuregrowth Asset Management, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Futuregrowth+Asset+Management#Contact_Details

Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/.

Similar Posts: