The financial viability of unsecured lending in South Africa
Date
2015
Authors
Govender, Deshandren
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Abstract
Unsecured lending has experienced incredible growth in South Africa in recent years, however there is currently much speculation and unrest in the market with the recent downfall of the leader, African Bank (Dick and Theobald, 2013).
The research investigated the financial viability of the unsecured lending business model. The study incorporated an all encompassing approach by assessing the financial performance across the main players in the industry, gathering opinions from credit experts across the industry and lastly by assessing the impact on the credit consumer. The banks in question are Absa, African Bank, Capitec, FNB, Nedbank and Standard Bank.
Two research questions were applied. The first question assessed the financially sustainability of the unsecured lending business model in South Africa. The financial performance data was quantitative, whereas the opinions of credit experts were qualitative, incorporating semi-structured interviews with thematic analysis. The second question assessed the dependency of South African credit consumers on unsecured lending credit. The data required for assessing the impact on the credit consumer was quantitative. An interpretive analysis was applied on the results.
The findings suggest that unsecured lending is financially sustainable based on the financial performance of banks currently lending in the environment. This was further cemented by the opinions of credit experts practicing in the industry. Second to this was the identification of the strong dependency that South African consumers have for unsecured lending credit.
The research concludes that unsecured lending is financially viable in South Africa. It will continue on this path, as long as lenders ensure that they lend responsibly and credit consumers ensure that they borrow for the right reasons.
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Keywords
Bank loans -- South Africa. Consumer credit -- South Africa. Debtor and creditor -- South Africa.