NEWS WIRE: South Africa: Microlenders’ Debt Book Balloons to R30bn

MICROLENDING ballooned more than R6bn (USD 855mm) to nearly R30bn (USD 4.27bn) in the year to February, according to figures released by the National Credit Regulator yesterday. The data show that consumer appetite for debt is still very high, despite four rate increases last year.

The head of the National Credit Regulator’s research and statistics division, Marlene Heymans, said the microlending loan book grew 27% on the previous year to R29,2bn (USD 4.16bn). Disbursements rose 19% to R32bn (USD 4.56bn), she said. This indicated that South Africans were sinking deeper into debt, and were defying repeated warnings by the monetary authorities that they should not overextend themselves.

Heymans said the credit regulator was concerned about the level of indebtedness. She warned that if the trend continued unchecked, many consumers would soon find themselves in a debt trap. “We are concerned especially about consumers at the lower end of the market because their ability to repay is less than that of people in other segments,” Heymans said. “We are cautioning consumers about taking on new debt. We are also cautioning credit providers to issue loans responsibly.”

She said the National Credit Regulator had taken over enforcement of the exemption notice to the Usury Act from the Micro Finance Regulatory Council and from next month, all credit-granting institutions would be governed by the National Credit Act.

There are more than 2000 microlenders registered under the Usury Act. The credit regulator regulates the majority of microlenders, including loans made through banks and retailers, as well as microlenders such as African Bank Investments and Capitec.

Heymans said statistics for the February quarter from microlenders registered under the Usury Act reflected continued growth in microloans. She said 4,8million-loans valued at R8,8bn (USD 1.25bn) were disbursed in the quarter, up 3,5% on the November quarter. The average loan increased from R1 801 to R1 837 (USD 262).

During the quarter, banks disbursed R3,5bn (USD 499mm), which was unchanged from disbursements in the November quarter. “This is the result of moderate growth in the microloan books of mainstream banks, and moderate consolidation among microlending banks. The outstanding loan book was R13,1bn (USD 1.86bn) at the end of the quarter,” she said.

Disbursements by private companies rose 8,5%, from R3,56bn to R3,87bn (USD 551mm), she said. The retail sector was the main contributor to the growth because of increased activity over the festive season. The outstanding loan book for the sector was R13,98bn (USD 1.99bn). Combined disbursements for close corporations and trusts remained unchanged at R1,2bn (USD 171mm). The average of the loans they issued was R764 (USD 109).

Heymans said disbursements by public companies also remained unchanged, at R23,5m (USD 3.35bn), in the February quarter, and the average of the loans disbursed was R 570 (USD 81). Not-for-profit lenders reported a decrease of 11% in disbursements, from R66m in the November quarter to R59m (USD 8.4mm).

Heymans attributed the bulk of the decrease to one big lender that “usually scales down operations during the quarter”.

The loan book for not-for-profit lenders increased 3,5% to R96m (USD 13.7mm). More than 90% of the disbursements were loans to small business enterprises. Disbursements by co-operative microlenders increased 12% to R73m (USD 10.4mm), she said.

Source: AllAfrica.com

http://allafrica.com/stories/200705220161.html

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