Abstract
M.Com. (Economics)
The banks role in financing growth and development has come under the spotlight
over the past year, as part of a political debate about what role the private sector
should be playing to address South Africa's social and economic problems. The
introduction of the proposed Community Reinvestment Bill raised the prospect that
banks could be forced by government into financing low cost housing.
In my opinion community reinvestment must not be pursued through the introduction
of legislation by government but rather through sustainable partnerships between
government and the private sector which could deal with all aspects of community
reinvestment. The main purpose of the study then is to propose a framework for this
partnership between government and the private sector in providing housing finance
to low income housing consumers. In this way community reinvestment will be
multi-faceted, reflecting the need of government to introduce concrete sanctions
against racial and geographic discrimination whilst facilitating the establishment of
banking capacity and foster banker willingness to support local economic
development programmes.
An extended literature study was undertaken which literature study serves to
document current viewpoints, principles and existing research on the research
objective. From the literature study, the reasons for the failure of the United States of
America version of the Community Reinvestment Act is stated, the objective of the
proposed Community Reinvestment Bill is considered as well as the housing finance
system into which government wants to introduce this Bill. The introduction of
community reinvestment is not conducive to economic growth and to illustrate this
argument, the provision of housing finance by either the banks or government is
considered. The attitudes, perceptions and financial behaviour of the low income
housing finance consumers was also considered by documenting existing research
that has already been done in this regard. A recommendation is made on a possible
framework for implementation of community reinvestment in the South African
environment.