MICROFINANCING
with know-your-customer (KYC) requirements,” he adds.
KYC requirements form part of FICA, and stipulate that customers
have to provide proof of identity, physical address and income tax
number(s) in order for the relevant financial institution to validate the
information.
Microlenders (on or offline) are regulated by the National Credit
Regulator (NCR). They are provided for under the Banking Act and
may not take wholesale deposits of more than R1m, in terms of an
exemption in that legislation. The NCR implements and executes
the exemptions that its members fall under, regulates members and
addresses complaints.
The problem, says TMS Research CEO Petar Soldo, is that although
parts of it are regulated, there are a lot of unregulated or unregistered
lenders, and this is what introduces risk into the system. “It isn’t enough
to have registered lenders who act responsibly, if people go to the
unregulated lenders.
“It is hard to know what is happening at present. If you look at industry
reports, it seems that a lot of microloans are used for good purposes –
home improvements, education, etc. But when you actually do research
into the market, you see a very different picture. A lot of loans are used
to buy food or pay back interest/instalments on other credit.
“As formal unsecured credit is moderated or becomes harder to access,
the need doesn’t go away, so people go to where they can get credit,
“It isn’t enough to have
registered lenders who
act responsibly, if people
go to the unregulated
lenders.”
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