Un­se­cured lend­ing may shrink 25% – an­a­lysts

CityPress - - Business -

The mar­ket for loans not backed by col­lat­eral might shrink by 25% if gov­ern­ment pro­pos­als to cap in­ter­est rates won ap­proval, said an­a­lysts at Av­ior Cap­i­tal Mar­kets, who spoke with un­se­cured len­der Capitec Bank.

“Man­age­ment ex­pects the for­mal un­se­cured credit mar­ket to shrink by about R20 bil­lion a year due to in­ter­est rate caps,” Av­ior an­a­lysts Harry Botha, WJ De Vries and Bjorn Zi­ets­man said in a note to clients.

The depart­ment of trade and in­dus­try has sug­gested cut­ting the max­i­mum in­ter­est rate lenders can charge on un­se­cured credit from 32.65% to 24.78%, with the aim of re­duc­ing in­debt­ed­ness among con­sumers.

African Bank In­vest­ments Lim­ited, the coun­try’s big­gest un­se­cured len­der, col­lapsed last year amid ris­ing bad debts and a lack of fund­ing.

Oth­ers op­er­at­ing in this mar­ket in­clude Capitec, once African Bank’s big­gest ri­val, and re­tail­ers like Lewis.

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