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This Analysis provides a discussion of the factors underpinning the credit rating/s and should be read in conjunction with our Credit Opinion. The most recent ratings, opinion, and other research specific to this issuer are provided on Click here to link.

SOUTH AFRICA Europe/M.East/Africa

January 2006


Mardig Haladjian George Chrysaphynis

Capitec Bank Limited

Strategy and Competitive Position
Although Capitec Bank is one of the main players in the South African microlending industry1 and has an estimated 10% share of the market (40% share of the one-month loans market), it remains a very small institution even by local standards (total assets of USD 137mn as at February 2005, one-tenth the size of African Bank, the largest microlender). We do see possible risks in the development stage of a young institution growing at a rapid rate, but we take comfort from its good understanding of the microlending business, its careful risk management, prudent approach to liquidity, good information systems used to manage the risks and supervision by the SARB.2

We believe that Capitec’s technology-driven business model is the right approach to serving the low-income-earning population. The bank has strong front-end information technology, including the paperless (no forms to fill, tasks are carried out electronically) and cashless (using ATMs and drop-safes) branches. By making use of magnetic strip and electronic smart cards (with embedded computer chip) that can be used not only in its own 208 ATMs but in all machines linked to Maestro, Capitec uses technology as its main distribution means. The bank is also able to use the distribution outlets of retailers;…...

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