press releaseBy Rajaa Azzakani
Unsecured lending by banks in South Africa is still on the increase, but at a slower rate than previous years, the Portfolio Committee on Trade and Industry has heard in Parliament.
Ms Joanmariae Fubbs, Chairperson of the Committee, emphasized that this type of lending had to be tackled seriously as "consumers should not be overburdened with debt they could not afford."
She also requested a breakdown from financial institutions as to what these loans were used for.
Her comments comes after a presentation by the Banking Association of South Africa, together with some of its big clients like FNB, Standard Bank, Absa, Nedbank, Capitec and African Bank on the affects of unsecured lending on South Africans. African Bank and Capitec are at the forefront of unsecured lending to people in the lower income bracket.
Mr Cas Coovadia, Managing Director of the Banking Association of South Africa (Basa), said since September last year credits to South African had slowed down even further. "We want to be responsible in how we give credit without stopping it completely," he noted.
He urged authorities to get a handle on unregistered lenders, who according to him "were lending money from the boot of their cars."
Mr Tami Sokutu from African Bank expressed his concern that in the last 12 months unsecured lending has been tainted as the "devil of lending". "We are one of the pioneers of unsecured lending to people that other banks would not lend to. We wanted to meet the developmental needs of the people of South Africa who do not have the security to apply for bank loans."
According to him some of their clients used the money for house renovations and education. "There is a danger in bedevilling unsecured lending when it can actually improve the lives of South Africans."
FNB said over-lending should be address instead, which was why it favoured affordability guidelines, while Standbard Bank felt the key is fair and appropriate lending.
Mr Christiaan van Schalkwyk of Capitec indicated that the Committee should take cognisance of the environment banks were operating in. "We must look at the history of credit provision in South Africa and the people that were denied access before. Now we have people using credit to improve their lives." He said the National Credit Regular (NCR) should be staffed appropriately to ensure fair play in the industry.
The banks were also not in favour of a credit amnesty for those "blacklisted" after debts had been paid. In terms of the proposed amnesty, names could be removed once debt had been settled and people would not have to stay on the blacklist for up to 5 years.
Committee member Mr Xitlangoma Mabasa felt banks should put more money into educating their clients on products. "We must reduce the playing field for loan sharks."
Mr Bheki Radebe, also a Committee member, wanted to know about the adversarial relationship between the NCR and the banks while Mr Geordin Hill-Lewis felt the NCR had insufficient information on the scale of the unregulated industry and illegal lenders.
Ms Fubbs indicated that blacklisting sometimes made it difficult for people to find employment.