13 Years of progress Building Communities
Shortly after full political rights became the law of the land, the Thembani International Guarantee Fund was launched to help lay the foundations for South Africa’s economic and social rights.
Thembani was established by Shared Interest, a U.S. NGO, and Recherches et Applications du Financement Alternatif au Développement, a Swiss development finance institution, in 1996. Thembani became a South African company registered under Section 21 of the South African Companies Act that offers a vehicle to invest in South Africa’s democratic development.
In Zulu, “Thembani” means “give hope and encouragement” – and since 1996, the guarantees placed and managed by Thembani have unlocked more than R100 million in credit for institutions serving the country’s lowest income communities. The guarantees and technical assistance supplied by Thembani have served as catalysts for a wide variety of initiatives, including credit for institutions lending to small and micro entrepreneurs, emerging contractors building infrastructure and low-cost housing, and rural communities developing income-generating initiatives.
During its first decade, Thembani’s guarantees have utilized capital raised for this purpose by overseas partners – primarily Shared Interest in the U.S. Shared Interest’s investors include individuals and institutions that supported the movement to end apartheid, and that share a commitment to building an equitable South Africa. Thembani plays a critical role in the placement, negotiation and monitoring of these guarantees. It identifies potential project partners, provides them with essential technical assistance in structuring their projects and loan applications, helps them identify appropriate lending banks and negotiate their loans with them, and works closely with the banks to enhance their capacity to analyze the sector and issue the loans. Thembani also provides vital services to its overseas partners, reporting on potential and outstanding guarantees, placing new guarantees, and conducting quarterly risk ratings of the outstanding guarantee portfolio. In the process, Thembani connects overseas and domestic financial organizations – creating a vital link between organizations developing new models and mechanisms for international development finance.
Since development finance is an emerging area of expertise in South Africa, Thembani is setting new precedents with virtually every guarantee. The standards and structures it establishes for a loan to an organization serving emerging contractors building low-cost housing differ dramatically from the mechanisms and agreements for a microfinance institution or a rural development initiative. In each case, Thembani staff must evaluate both the industry and the organization in question, determine where and how credit can provide and essential lever for development, and structure that assessment into a viable credit agreement – to be carefully monitored and supported with assistance as needed over the life of the guarantee.