In S. Africa, a model bank for Third World Capitec offers clients line of basic services at reasonable rates By John Donnelly, Globe Staff | April 30, 2005 STELLENBOSCH, South Africa -- For most of South Africa's working poor, doing business with a bank has been out of the question. One-month loans carried an average 30 percent interest rate. Many savings accounts lost money every month because of multiple fees. Now the poor suddenly have new options, including one that some analysts say could be replicated throughout the developing world. Perhaps the most promising initiative is offered by privately owned Capitec Bank, which opened five years ago as a micro-lending institution and a year ago expanded into savings accounts. It now has 300,000 customers, half of them opening savings accounts. The bank offers 10 percent interest on some savings accounts, a new debit card in a pilot program with MasterCard that allows poor people to do business without cash, and a one-month loan with a 15 percent interest rate. While that rate may seem steep, many South Africans, conditioned to extraordinarily high costs, say they welcome it. ''I am short of money, that's why I came," said Oscar Bota, 35, who stocks shelves in a grocery store. ''The other banks offered high interest rates. These people are much cheaper." Two other promising options are a government-sponsored effort for low-income people called Mzansi that led to more than 550,000 new accounts from October to February; and Ithala Development Finance Corp. recently has compiled another half million accounts for largely low-income earners in the large province of KwaZulu-Natal. Capitec executives, backed by supportive US officials, hope they can eventually expand the bank to poor people around the world. ''We believe there is a huge opportunity not only in South Africa, but elsewhere in the world, to offer people a low-cost, basic services bank," said Riaan Stassen, Capitec's chief executive, in his spare office in this region north of Cape Town renowned for its fine wines. Capitec opts for the untraditional. Most of its 230 branches are either in townships or near places where large numbers of the poor work or pass through, such as train stations and mines. Most offices do not have glass windows between banker and client; the branches are almost entirely paperless; many are virtually cashless; and most don't have security guards, a stunning absence in a country beleaguered by violent crime. ''They are very innovative," Joann Lawrence, director of the office of economic growth for US Agency for International Development in South Africa, which provided a loan guarantee for Capitec. ''They are committed to bringing these banking services to low-income households." Lawrence said she was impressed with the atmosphere at the branches, calling it ''banking with dignity" for the poor. She said the decision to take down glass barriers between tellers and clients should attract customers. ''They want it to be a comfortable experience," she said. The bank is adding about 15,000 savings accounts a month -- it does not offer checking accounts -- but that number still represents a tiny fraction of the market in South Africa, which has a population of 45 million. Residents hold an estimated 18 million debit cards. But the market for the working poor potentially is huge. A recent study suggested that 13 million potential customers were using little, if any, bank services. South Africa's banking system was largely formed during the apartheid era, when it served mostly white middle- and upper-class clients. Even in the first years after the advent of democracy in 1994, ''the banks didn't quickly become accessible and affordable to the majority of the population," said Anna McCord, a research associate in the School of Economics at the University of Cape Town. ''Now they are faced with the question of how to service the poor." Capitec has deliberately kept a low profile largely because its officers think the bank is not ready to handle a huge influx of customers. Its locations in or near townships, as well as word of mouth, has brought in a steady stream of people, with almost no advertising. Just 100 feet from the Bellville commuter train station, which transports thousands of people daily into Cape Town, branch manager Adele Tesner, 41, said the bank also tries to be flexible. Capitec's offices are generally open 8 a.m. to 5 p.m. -- the country's bigger banks mostly keep hours of 9 a.m. to 3:30 p.m. -- but some Capitec branches open as early as 6 a.m. Chief executive Stassen said he hopes to soon have a 24-hour bank that would serve miners. In Bellville, Tesner opens the branch at 7:30 a.m. when she sees customers outside. ''Whoever wants to wander in, can, no matter the time, as long as we're here," she said. Capitec has almost none of the security present at most South African banks -- armed guards and ''man-trap" entry doors, in which after customers open one door, they must wait for it to close until a second door can be opened. Capitec customers also don't stand in lines; they sit in chairs until a teller is free. And they don't fill out forms -- they give information to a teller, who types it into a computer. Each customer receives a bank card with his or her photo. Opening a savings account takes about 10 minutes; to obtain a loan may take 20 minutes. ''The people working here are the key -- how they treat you," said Mandla Sihoyo, 48, a government clerk and a new Capitec customer. ''I didn't try Capitec before, but then this lady told me about the loan rates, and explained these very carefully to me." Sihoyo received a one-month loan for about $160; interest amounted to about $24. He said he was fed up with interest rates offered at other South African banks. As an example, he said that he shopped for a $700 two-year loan and the best deal would have cost him $1,000 in interest. ''It's unbelievable," he said. John Donnelly can be reached at donnelly@globe.com. ----------------------------------------------- The high cost of giving N.H. couple appraises philanthropy in S. Africa By John Donnelly, Globe Staff | April 30, 2005 MASIPHUMELELE, South Africa -- It was just noon on a recent day, and already Carol and John Thompson had held more than half a dozen meetings in this poor cramped community of 30,000, and much more work lay ahead. The couple, who spend most of the year in Center Harbor, N.H., came here five years ago with a simple objective: ''We wanted to focus on one township and see what one couple from America, with limited resources, could do," John Thompson said. Now, they are seeing tangible results -- houses built, children on scholarships, a new library. Yet they often feel unfulfilled, worried, and exhausted, they say, by the strains that come with doing good. ''A lot of what we do is very discouraging," Carol Thompson said as she stood outside a two-story day-care center built by their small nonprofit foundation. ''It's a huge roller-coaster ride. There are days when you wonder what you are doing here, and there are days when you are at the absolute top." Across Africa, such topsy-turvy experiences of giving are common among the thousands of American volunteers like the Thompsons. They are motivated by the desire to help, but often wonder whether their deeds are having the desired effects. Unlike the response to the tsunami in the Indian Ocean basin in December, where people from around the world came together to help at the epicenters of fresh disaster, those who come to Africa are often working on their own, dealing with disasters that have unfolded slowly over many years such as the AIDS pandemic, periodic famines, and poverty passed through generations. Influence can be hard to measure -- except, perhaps, in the small communities or neighborhoods where they work. In Masiphumelele, called Masi for short, the Thompsons' projects have brought several concrete improvements in the community about 20 miles south of Cape Town, near the coastal town of Fish Hoek. Over five years, their nonprofit group, called Masiphumelele Corporation, has built 21 houses, the day-care center, a youth center, library, and classrooms. It has provided 17 students with scholarships to attend middle school, high school, and college; set up an after-school sports program for 270 students; and signed up 26 mostly white volunteers from surrounding communities to help Masi's children in a variety of programs. Now, it is building Masi's first park and playground -- a small green oasis surrounded by shacks. Last year's budget of about $140,000 came from 72 donors. Most of the donors are individuals or small foundations. The Thompsons provide nearly one-third of the donations each year, according to the organization's website, with some from the Thompsons' neighbors in New Hampshire. ''I am so grateful to the Thompsons," said Spokazi Jini, 18, who is receiving a scholarship to attend the Muizenberg campus of False Bay College. She receives free tuition, books, and supplies and is studying business management. ''I'm so excited to finish this semester, so I can show them my grades, and show them how serious I am." Down the street, Doreen Zanyiwe, 51, walked up the steps of her new two-story day-care center funded by the Thompsons. Zanyiwe stood in front of a roomful of about 50 preschoolers who quietly stood in line, ready to receive their lunch. ''They brought a lot of change in town," Zanyiwe said of the Thompsons. ''We never had a library. We never even dreamed of having a library before. And now we have several" day-care centers. Yet, for all of these successes, the Thompsons also see failures and unintended negative consequences of their work. Some residents have turned against recipients out of envy, the Thompsons say. More worrying, they say, is whether community members will keep their programs running when they are no longer there. Carol Thompson, 64, grew up in South Africa. Her father managed the beautifully manicured wine estate at Vergelegen, north of Cape Town; she went to college in England, where she met her future husband, who is British. In the early 1960s, the two moved to Boston, and John Thompson, now 66, embarked on a successful career in management consulting, computers, and teaching. She worked as a realtor for many years. In 1998, they bought a house south of Cape Town as a retreat from New England winters. ''We also decided to look around and find where we could be useful," Carol Thompson said. ''That's when we found Masi." Masi began as a squatter camp more than a decade ago as black South Africans, mostly from the rural eastern Cape, migrated here seeking work. Most residents are members of the Xhosa tribe, and most have found the transition here difficult. Unemployment is estimated at 90 percent, and domestic abuse and alcohol-related troubles are common. In Masi, the Thompsons started with a $40,000 annual budget in 1999, funding the day-care center and a food program at the school, among other projects. Almost immediately, they ran into problems. ''There was a lot of jealousy" toward Zanyiwe, the owner of the day-care center, John Thompson said. In addition to building the center, the foundation also built Zanyiwe's house, for which she is paying a no-interest loan. ''She lost her friends," Carol Thompson said. Because nearly everyone in Masi had so little, those who began to succeed with the Thompsons' help were eyed with envy. ''It was like, 'Who do you think you are? You've got a whitey to build your house,' " John Thompson said. Complicating the decisions on how to spend money, the foundation struggled to identify elected officials or even civic groups that represent much of the settlement, and had to make its own judgments on how to spend. The government requires nonprofit groups in South Africa to follow basic regulations, but gives them wide autonomy on how to implement their programs. Zanyiwe said Masi residents closely scrutinized each selection, gossiping about perceived biases. Other issues arose, including complaints about which students received scholarships. ''It seemed to many people that the teachers arranged to have their friends' children receive the award," Zanyiwe said. ''And sometimes a child who was new to the school" received a scholarship, angering residents who had lived there longer. The Thompsons say they selected the candidates based on merit, and they are proud of them. ''The fact that one boy goes from sleeping on cardboard in a shack to winning prizes in the ninth grade of his new school is extraordinary," John Thompson said. The boy, Lungile Magubudela, was named as the student ''who shows the greatest leadership potential" at neighboring Fish Hoek Middle School last year. The creation of Masi's library could be called extraordinary as well. First, the Thompsons managed to get a donation of 5,500 books from Buffalo (N.Y.) State College. Then, the Fish Hoek head librarian, Sue Alexander, made the Masi library a satellite of her own library, and trained Masi residents to run the operation. Finally, neighbors of the Thompsons in Holderness, N.H., Bob and Sara Rothschild, donated money for a library extension; Bob Rothschild later got more involved, becoming foreman of the construction project. Despite that, John Thompson worries about the library's future. His nonprofit pays $12,000 annually for the collective salaries of the workers, and he does not know who will eventually take over responsibility for the endeavor. Yet, watching an elderly white woman read to a small group of black 4-year-olds at the library nudged aside such long-term worries for the Thompsons. Megan Faraday, 84, a retired teacher, said afterward that she treasures her weekly visit. ''This is a very deprived community," she said. ''You get such satisfaction coming here, especially when a child says, 'Are you going to come tomorrow?' ''I tell them, 'You bet.' " John Donnelly can be reached at donnelly@globe.com.