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Unsecured credit up 9.14% in Q2

‘Not…alarming at this stage’– Ngoako Mabeba – manager of statistics, NCR.

SIKI MGABADELI:  The National Credit Regulator says that unsecured credit increased by 9.14% in the quarter to end-June, compared with the quarter to end-March, while the year-on-year increase was 18.1%. You’ll know that unsecured lending is loans that are issued and supported only by the borrower’s creditworthiness, and they’ve been in the spotlight with government trying to take steps to rein in unsecured lenders amid reports that they are charging exorbitant interest rates and initiation fees.

Let’s chat to Ngoako Mabeba, who is manager of statistics at the National Credit Regulator. Ngoako, thanks for your time today. What’s led to this increase in unsecured lending?

NGOAKO MABEBA:  Good evening, Siki, and good evening to your listeners. I’d say the majority, 82% of our credit is provided by the banks. So the main driver of unsecured credit – they seem to have had an appetite for unsecured credit in this quarter, but I think from the perspective of the NCR, it’s not something that’s alarming at this stage. It’s a trend that we are going to observe. But you’d recall that we at some stage, around 2012, reached levels where unsecured credit expended a quarter was up to R29bn. It’s currently sitting at R20bn. We are watching it. It has increased for the quarter, but it’s been generally coming down.

SIKI MGABADELI:  Okay. Would you say that that moderation has been because there has been such a focus from yourselves, from the DTI and from government that we need to rein this in?

NGOAKO MABEBA:  In a way. If you recall, there were legislative interventions that did come through, including the caps that were actually introduced on May 6 this year, effectively reducing unsecured credit by about 5%. The maximum that can be charged at this moment is 28%. However, we encourage credit providers to compete within this ceiling, not to charge at the maximum cap.

SIKI MGABADELI:  Are consumers becoming warier of credit? I see there’s been a quarter-on-quarter decrease in the number of applications for credit.

NGOAKO MABEBA:  I think it’s driven largely I would say by issues of seasonality. The upper element has been a draw-back relating to extension of what we call credit facilities. This includes things like your store card, your petrol card, your credit card and overdraft facility, again driven by the banks. There has been I would say a steady withdrawal, especially by the banks, relating to those credit types.

I would say the reduction has been … to the appetite for that credit, and some, especially non-banked retailers have attributed this to the measures that were introduced relating to affordability regulations.

SIKI MGABADELI:  Okay. Let’s look quickly at the credit bureaux and the number of credit-active consumers. I wonder if people are taking advantage of accessing their credit records at all.

NGOAKO MABEBA:  I would say we’ve seen some encouraging increases in this quarter – about 145 in the quarter. However, I don’t think it is at the level where we are satisfied that people are actually accessing this free credit report. It is free, for that matter. But I think it stems from the fact that your credit score, especially in the Republic, is not … compared to let’s say, developed countries, where I could actually use my credit score to reduce the interest that I would be charged by the credit provider. I think if we reach that level, even for, I would say, our middle class, then we would see people seeking their credit score and actually using it to negotiate a better interest rate when they enter into credit agreements.

SIKI MGABADELI:  That’s not a bad idea. Thanks to Ngoako Mabeba.

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