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Abstract

There has been a growing existence of informal financial institutions in both rural and urban areas of South Africa. The objective of this paper is to identify factors influencing the choice of informal financial service providers in the peri-urban areas of South Africa. Data from 193 respondents was subjected to Analysis of Variance to identify the significant factors distinguishing the clients of moneylenders from the non-moneylenders. The results show that personal characteristics such age, education, occupation and marital status explain the choice of moneylenders. Gender is not a distinguishing factor, implying that both male and female have the same choice pattern. Clients choose certain services due to low interest, quick service and the fact that they are acquaintances. Monthly income, rather than other, also explains the choice of moneylenders over non-moneylenders. The results of the analysis suggest pertinent issues for consideration in institutionalizing informal service provision within the mainstream sector.

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