The impact of the National Credit Act on household debt levels in South Africa
| dc.contributor.author | Paile, Kabelo | |
| dc.date.accessioned | 2014-06-12T07:48:24Z | |
| dc.date.available | 2014-06-12T07:48:24Z | |
| dc.date.issued | 2014-06-12 | |
| dc.description.abstract | The high household debt level, as seen in recent years, has been a concern for many governments and financial institutions because of the decline in the well-being of households and the financial burden indebted households pose on the economy. A household that cannot afford to service its debt repayments will ultimately experience a decrease in its standard of living, and many other essential monthly expenses such as school fees may be “crowded out” by the debt repayments. An alarming trend is the high levels of debt that households have indulged in, with little regard for the negative consequences of such accumulated debt. Households which are unable to service their debt repayments put a strain on the economy and contribute to an increase in the cost of credit, DTI (2003). Consequentially, credit intermediaries will experience high bad debts and thus, in turn, will factor this cost into the overall cost of credit. The high household debt levels are caused by both demand and supply side factors such as the overall decrease in interest rates, greater financial inclusion post-1994, a lack of financially educated consumers, vague debt contracts and reckless credit lending by financial intermediaries, National Credit Regulator (2012). Excessive debt could indicate that the debt level has surpassed all other indicators such as household income and net wealth, which would make debt unsustainable in the long run. The aim of this research is to analyse the South African household debt levels and to assess whether the implementation of the National Credit Act has had the desired effect on household debt levels. The research will rely on previous literature and use time series data extracted from The South African Reserve Bank to complete regression analysis. The research begins by introducing the concept of excessive debt and highlighting the current debt levels in South Africa. The literature review covers the causes, advantages and disadvantages of debt, and the last section covers the results of the South African household debt trends. The results indicate that household debt has indeed increased at an alarming rate, and these debt levels continue to rise. The research highlights the implications of over-indebtedness on both the microeconomic and macroeconomic level, and the dire consequences that can cripple the economy if household debt levels continue to increase unabated. It is imperative that policies set out by the National Credit Regulator succeed in curbing household over-indebtedness sooner rather than later, to assist and protect the households which are already over-indebted and prevent further over-indebtedness. The research reveals that households will continue to battle with over-indebtedness, thus the importance for policies to be in place to protect both the consumers and financial services provides, and ultimately the economy. | en_ZA |
| dc.identifier.uri | http://hdl.handle.net10539/14754 | |
| dc.language.iso | en | en_ZA |
| dc.title | The impact of the National Credit Act on household debt levels in South Africa | en_ZA |
| dc.type | Thesis | en_ZA |
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