Johannesburg - Consumer credit health is deteriorating this
quarter when compared to the fourth quarter of last year‚ leading global credit
bureau TransUnion reported on Tuesday.
The bureau’s consumer credit index (CCI) fell to 44.4 in the
current quarter from 49.4 the quarter before‚ reflecting a marked escalation in
consumer loan impairment rates and rising pressures on household cash flows and
The index is a unique indicator of consumer credit health
based on a 100-point scale. An index above 50 indicates improving credit
health‚ while a reading of below 50 shows deterioration.
Credit health refers to the ability of consumers to service
existing credit obligations within the constraints of monthly household
The credit bureau noted that impairment records across its
payment profile database had deteriorated considerably in recent months.
“The number of accounts three months in arrears is up by 10%
in the last year‚ a similar increase to that experienced between 2007 and
2008‚” TransUnion CEO Geoff Miller said.
“While the actual number of impaired accounts remains some
way below the distressed levels of 2009‚ it is clear that they are now rising
Heavy job losses sustained in the fourth quarter of last
year and January this year were identified as a possible explanation for why
impairment records across the TransUnion payment profile database had
deteriorated in recent months.
The economy continued to shed jobs in the final quarter of
last year‚ according to official Statistics SA figures.
“The employment situation is a concern. Retrenchments are a
clear and direct risk to consumer credit health‚” Miller said.
While risks to South African consumer credit health were
fairly balanced in the fourth quarter of last year‚ they appeared to have
tilted toward increased consumer credit risk in this quarter.
Miller noted that while the index did not yet indicate a
crisis‚ the deterioration in credit health was a clear signal of rising
financial stress levels and that credit providers needed to remain prudent.
Excessive borrowing and lending could “easily” begin to push
more consumers into a position of budget distress‚ Miller added.
Concern was raised last year regarding the high level of
growth in unsecured lending‚ with regulatory authorities saying that while they
noted the concerns‚ there was no bubble in this type of lending.
The index is driven by objective market data rather than
consumer surveys or questionnaire responses.
“TransUnion’s indicator combines actual consumer borrowing
and repayment behaviour obtained from the extensive TransUnion credit database
with key‚ publically available macroeconomic variables impacting household
finances‚” Miller explained.
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