This article evaluates demand- and supply-side aspects of the formal microcredit sector in South\nAfrica and the environment in which the sector is regulated. Although South Africa has a competitive\nfinancial sector relative to a sample of upper middle-income countries, the historical bias\ntowards formal sector banking resulted in a lack of appropriate credit instruments for poorer\npeople. In 1992, new regulations facilitated the legalisation of microfinance institutions and, by\n2000, the sector had grown to over 2 per cent of total credit extended by the monetary sector,\nwith over 1 300 institutions supplying microcredit to the public. The article presents the first statistics\nof different types of microcredit institutions as well as some of their disbursement trends,\nrecorded since 1999 by the Micro Finance Regulatory Council. Thereafter, the demand for\ncredit is assessed between 1995 and 2000, before best-practice regulation and South Africa’s\ndegree of compliance are discussed.