Determinants of unsecured lending : an empirical investigation of consumption, lending rates and deregulation in a South African context

Motau, Hlokammoni Grathel (2015-04)

Thesis (MDF)--Stellenbosch University, 2015.


ENGLISH ABSTRACT: South Africa has experienced a significant growth in household unsecured credit extension, igniting concerns around the potential negative impact of household indebtedness on the stability of the banking system. With the use of correlation and ordinary least squares, the study attempts to prove a relationship between growth in unsecured lending (dependent variable) and consumption, lending rates and de-regulation (independent variables). Although there is a correlation between growth in unsecured lending and interest rates, this was not statistically significant. The study also found a strong relationship between unsecured lending and the other independent variables. Due to income and wealth inequality exacerbated by the past political dispensations as well as continued rise in the cost of living, unsecured lending provides a source of supplementary income that allow households to smooth their consumption expenditure over their life-cycle. On a longerterm basis, the country needs to gear itself to focus primarily on channelling resources towards productive investments. Quality education and skills as well as a culture of entrepreneurship and wealth creation should be cultivated at a young age.

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