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Johannesburg - The explosion of unsecured credit in South Africa has increased from R54bn in 2009 to R170bn in 2013, according to Ian Wason, CEO of DebtBusters.
Of the 20.64 million credit active consumers, 9.93 million have impaired credit records.
There has also been a 25.65% year-on-year decrease in the amount of unsecured credit granted.
This indicated that the growth of unsecured credit has slowed down, although an average amount of R21m in unsecured credit is still granted on a quarterly basis, said Wason.
About 29.92% of the total amount of unsecured credit agreements granted were for personal loans less than or equal to R3 000.
Unsecured loans of this size have seen a year-on-year increase of 32.06%, with the majority of these having payment terms of under 6 months.
An estimated 36.91% of unsecured loan accounts are in arrears.
Credit facilities - primarily credit cards, store cards and bank overdrafts - increased by 5.52% quarter-on-quarter from R17.72bn to R18.70bn.
At the same time the value of mortgages granted increased by 0.57% quarter-on-quarter from R 34.52bn to R34.72bn.
"Nearly one in every two credit active consumers have impaired credit records," said Wason.
"Consumer credit health remains an issue in South Africa and more consumers are struggling to repay their debts."
Wason said credit providers experienced an increase in the number of applications for credit, amounting to 10.75 million in the fourth quarter ending December 2013, in comparison to 10.22 million applications in the third quarter ending September 2013.
"Low growth prospects, high unemployment rates combined with hiked interested rates and the increased cost of living, are forcing consumers to turn to unsecured credit when financially distressed," said Wason.
"Individuals are reaching the end of their credit line and no longer qualify for larger loans due to lack of affordability. As a result, desperate times have led them to resort to taking out smaller loans of R3 000 and less, which are generally over a short time period like ‘pay day’ loans, and are charged at 60% interest."
Wason pointed out that the unsecured credit gross debtors book has continued to grow on a yearly basis and has a seen a drastic jump in rand value, from the quarter ending December 2009 to the quarter ending December 2013.
"At what point will is the National Treasury going to step in and declare this to be a systemic risk?" he asked.
Another worrying increase to him is the amount of credit lent by retailers.
Retailers have seen a drastic quarter-on-quarter 39.40% increase in the total amount of credit granted. This may be in response to lagging retail sales, forcing retailers to expand their own credit to consumers to boost sales," said Wason.
Of the 20.64 million credit active consumers, 9.93 million have impaired credit records.
There has also been a 25.65% year-on-year decrease in the amount of unsecured credit granted.
This indicated that the growth of unsecured credit has slowed down, although an average amount of R21m in unsecured credit is still granted on a quarterly basis, said Wason.
About 29.92% of the total amount of unsecured credit agreements granted were for personal loans less than or equal to R3 000.
Unsecured loans of this size have seen a year-on-year increase of 32.06%, with the majority of these having payment terms of under 6 months.
An estimated 36.91% of unsecured loan accounts are in arrears.
Credit facilities - primarily credit cards, store cards and bank overdrafts - increased by 5.52% quarter-on-quarter from R17.72bn to R18.70bn.
At the same time the value of mortgages granted increased by 0.57% quarter-on-quarter from R 34.52bn to R34.72bn.
"Nearly one in every two credit active consumers have impaired credit records," said Wason.
"Consumer credit health remains an issue in South Africa and more consumers are struggling to repay their debts."
Wason said credit providers experienced an increase in the number of applications for credit, amounting to 10.75 million in the fourth quarter ending December 2013, in comparison to 10.22 million applications in the third quarter ending September 2013.
"Low growth prospects, high unemployment rates combined with hiked interested rates and the increased cost of living, are forcing consumers to turn to unsecured credit when financially distressed," said Wason.
"Individuals are reaching the end of their credit line and no longer qualify for larger loans due to lack of affordability. As a result, desperate times have led them to resort to taking out smaller loans of R3 000 and less, which are generally over a short time period like ‘pay day’ loans, and are charged at 60% interest."
Wason pointed out that the unsecured credit gross debtors book has continued to grow on a yearly basis and has a seen a drastic jump in rand value, from the quarter ending December 2009 to the quarter ending December 2013.
"At what point will is the National Treasury going to step in and declare this to be a systemic risk?" he asked.
Another worrying increase to him is the amount of credit lent by retailers.
Retailers have seen a drastic quarter-on-quarter 39.40% increase in the total amount of credit granted. This may be in response to lagging retail sales, forcing retailers to expand their own credit to consumers to boost sales," said Wason.
- Fin24
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