focus
Unsecured Lending:
let’s get it right
Lenders and regulators need to take action
A
s contentious as it may be to make the argument
that unsecured lending contributed to the unrest
in the mine village of Marikana in the North West
province, there are some lessons that can be drawn
from the incident by all stakeholders involved in
unsecured lending.
Following the death of miners at Lonmin’s Marikana mine,
some politicians and certain sections of the media implied that
mine workers demanded excessive wage increases partly because
of over-indebtedness and microlenders who doled out unsecured
loans largely to low-income earners. Bankers dismissed this as
too simplistic a point to make about a mining village that battled
political and socio-economic challenges, including a migrant labour
system that continues to put pressure on workers’ finances.
‘Marikana is an emotional issue. The strikes are now in the
Western Cape as well. If the media or the politicians want to use
unsecured lending and over-indebtedness as an excuse for other
fundamental issues then it’s late in the day,’ says Capitec’s CEO
Riaan Stassen.
Tami Sokutu, an Executive Director at African Bank Investments
Limited, the largest unsecured lender in the country, adds: ‘To
connect the incident as a real correlation to unsecured lending is
too simplistic for such a complex issue. A point to bear in mind
is that the customer initiates the borrowing and therefore it is not
appropriate to place the full responsibility on the lenders.
‘What is also worth mentioning is that our model is premised on
the fact that the provision of credit to customers is underpinned by
the assumption that the customer will have the ability to repay the
instalments (affordability calculation must be right) and that he will
be employed into the future, hence it is in our best interest that the
customer does not overextend himself,’ he says.
Sokutu added that when African Bank extended credit the
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Edition 4
company analysed if the customers had the ability to service the
instalments.
A glimpse into the National Credit Regulators (NCR) statistics
weakens the argument that the growth in unsecured loans is largely
driven by lending to the low-income segment.
Over the last three years there has been an increase of close to
2 million credit-active customers in South Africa. These clients in
the country are now over 19 mill