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- Short-term credit is defined as loans with a value not exceeding R8 000 and payable within six months.
- Altron's data points to a 7.8% decline in credit extension in the second quarter of 2022.
- There has been a jump in rejections of short-term credit applications compared to four years ago.
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The Altron FinTech Short-term Credit Impact survey, a barometer of the financial health of lower-income consumers and micro businesses, points to a further deterioration in lending in the second quarter - an indication that surging inflation and rising interest rates are eroding economic activity among SA's most vulnerable population.
The index, which is focused on the volume of loans extended by small lenders outside of the formal banking system, fell 7.8% in the second quarter from the first, which was expected, given that food and transport make up up a disproportionate share of the budget of lower-income households.
"It is really hard to see this market picking up significantly until we have some real sustained growth in the economy," says independent economist Keith Lockwood, who compiled the report on behalf of JSE-listed Altron.
While small, at about 0.1% by value of all credit, the report is one of two produced by Altron, which provides technology platforms to registered short-term credit providers, and wants to provide its clients with more information about their market.
According to the index, since the end of 2015, the value of short-term loans outstanding has trended lower, from a peak of R3.6 billion to less than R1.8 billion at the height of the Covid-19 Level 5 lockdown in the second quarter of 2020.
The pressures on the financial position of most households continue to be reflected in the high rates of rejection of credit applications. In the first quarter of 2022, almost two out of every three applications for credit were rejected, compared with less than one in two in early 2018, the report reads.
In the first quarter of 2022, the average value of a short-term loan with a term of up to one month was R1 904, up 2.6% from the previous year.
The equivalent averages for loans with terms of two to three and four to six months were R3 010 and R4 185, respectively, the report said.
Lockwood commented that there should be "creative ways" of looking at how to better exploit the network of small lenders who sometimes have the advantage of operating in communities to extend their services to advance loans to small businesses.
"Short-term credit is relatively more accessible to lower income groups than other forms of credit. This is due in part to short-term lenders operating within local communities and being able to use their personal knowledge of applicants to assess the risk of default in ways that are different to the more rigid risk assessment criteria applied by commercial banks."
