The impact of the National Credit Act (NCA) on the profitability of housing microfinance lenders in South Africa

Ntoampe- Mahlelebe, Tsaliko (2008-12)

Thesis (MDF)--Stellenbosch University, 2008.

Thesis

ENGLISH ABSTRACT: High interest rates on credit products in South Africa are not unusual. This would be beneficial to the South African consumers if the cost of incurring these credit products was lower than the benefit derived from incurring them .This is unfortunately not the case to the majority of the South African population. The unlikelihood of this situation is a direct result of the lack of access to appropriate savings and insurance products to a large number of South Africans. Most South Africans use credit, in the form of microloans to augment their consumption patterns. The majority of South Africans do not have a culture of saving; therefore they use credit as a substitute for the lack of savings when consumption patterns exceed income. Using credit as a substitute for the lack of savings becomes extremely costly for low income earners. The result is a perpetual dependence on credit, lack of accumulation of wealth and a lack of improvement in their standard of living. The perpetual dependence on credit has brought about unscrupulous lenders who take advantage of the low income earners dependency on credit for their daily existence. It is due to such exploitations that the South African government through its Department of Trade and Industry (DTI) intervened to bring normality in the South African credit market. This intervention was done through the promulgation of the National Credit Act (NCA), Act No.34 of 2005. The purpose of this study is to focus on a sub set of the credit providers in South Africa known as housing microfinance (HMF) lenders. The study explores the impact of the National Credit Act in the South African credit industry. The Act’s intentions are elaborated and the reality of the implementation of the Act on the drivers of profitability for the housing microfinance institutions is measured. The finding is that housing microfinance institutions have to restructure their business processes in order to be profitable and sustainable in the ambit of the National Credit Act.

AFRIKAANSE OPSOMMING: Vir menige finansiële produkte in Suid-Afrika is rentekoerse wat wissel tussen 80 en 150 persent is nie ongewoon nie. In ekonomiese terme kan verbruikers slegs voordeel trek uit hierdie hoë rentekoerse as die koste om hierdie krediet te verkry laer is as die voordeel wat voortspruit uit die aangaan van die koste. Hierdie situasie is hoogs onwaarskynlik in die oorgrote meerderheid van gevalle in Suid-Afrika. Die onwaarskynlikheid van hierdie situasie is die direkte gevolg van die gebrek aan toegang tot toepaslike spaar- en versekeringsprodukte vir ‘n groot aantal Suid-Afrikaners. Die meeste Suid-Afrikaners gebruik krediet (naamlik mikrolenings) om hulle verbruikerspatrone aan te vul. Die gebruik van krediet as ‘n plaasvervanger vir spaargeld word uitermate duur vir die lae-inkomste verdiener. Die gevolg is ‘n ewigdurende afhanklikheid van krediet, geen akkumulasie van welvaart nie en ‘n gebrek aan verbetering van lewenstandaard. Die ewigdurende afhanklikheid van krediet het gewetenlose uitleners geskep wat die lae-inkomste verdieners uitbuit wat afhanklik is van krediet vir hul daaglikse bestaan. Dit is as gevolg van hierdie tipe uitbuiting dat die Suid-Afrikaanse regering deur sy Departement van Handel en Nywerheid tussenbeide getree het om normaliteit te bring in die Suid-Afrikaanse kredietmark. Hierdie intervensie is gedoen deur die uitvaardiging van die Nasionale Kredietwet, Wet No. 34 van 2005. Die doel van hierdie studie is om te fokus op ‘n onderdeel van die kredietverskaffers in Suid-Afrika bekend as die behuising-mikrofinansiering-uitleners. Die studie ondersoek die impak van die Nasionale Kredietwet in die Suid-Afrikaanse kredietindustrie. Die Wet se oogmerke word uiteengesit en die realiteit van die implementering van die Wet op die drywers van winsgewendheid vir die behuising-mikrofinansiering-instansies word gemeet. Die bevinding is dat behuising-mikrofinansiering-instansies hulle besigheidsprosesse moet herstruktureer ten einde meer winsgewend en volhoubaar te wees binne die strekking van die Nasionale Kredietwet.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/80647
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