Banks scale back on lending in weak credit market

Issuing of new credit cards decreased 15% year on year in fourth quarter of 2018 as banks ‘target lower-risk borrowers’SA banks are scaling back on lending to subprime consumers as they shift their focus to those with higher credit scores, a move that may leave the needy out in the cold.

“The move that we are seeing is that lenders are shifting to lower-risk borrowers who are prime, prime plus and super prime. It is becoming harder for most consumers to get credit,” said Carmen Williams, director of research and consulting for TransUnion Africa. “Of course, if banks focus on lower risk clients, this leads to lower net interest income as the risk margin is lower for these clients. On the flipside, credit losses should also be lower for these clients,” he said.

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