JOHANNESBURG – Africa’s unsecured lending boom has left 40 percent of borrowers in default and millions of people in a debt trap, according to fund manager Differential Capital.
Instead of helping those most in need, the practice has led a consumption-driven debt boom by those least able to pay back loans, according to Differential. President Cyril Ramaphosa in August signed the National Credit Amendment Act into law, setting the groundwork for over-indebted consumers to have payments suspended, in part or full, for as long as 24 months, or even scrapped if their financial situation has been found to have worsened.
Capitec is South Africa’s biggest unsecured lender. While the big four banks – Standard Bank, Nedbank, Absa and FNB – also offer unsecured loans, their affordability tests are more stringent, it said. The South African Reserve Bank, which oversees banks, declined to comment.
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