controls Nedbank which, like its peer group, has developed a significant microlending business on its own. Does that mean that Old Mutual is compromised?
Canter is very specific that while microlending is presently under siege – there is still good money to be made for lenders into the sector, but it’s not without its risks.
“We believe (the current model) is on an unsustainable trend, we don’t believe these businesses are going down the tubes, but we cannot maintain these exposures in our socially responsible funds.”
While this does not spell disaster for microlenders, it certainly will push up the cost of funding, especially as bond investors reassess their risk parameters.
“We have a different filter across our funds,” says Canter. “We don’t want to destroy the businesses; we need competitors to the big banks. I speak for Futuregrowth and that’s not vetted by Old Mutual.”
In the meantime, Capitec has aggressively sought to manage the fallout following what the market has interpreted as a public denunciation of its business model.
“(Futuregrowth) do criticise the nature of this market segment which we do not necessarily agree with,” the company said. “Canter has confirmed that their wider suite of funding, for example bond and money market funding, will still include Capitec Bank’s issues.”
The group does not deny the massive problems t he i ndustry is facing and accepts it will have a difficult balancing act to manage its exposures especially in a low- GDP environment. Jobs are scarce and according to the National Credit Regulator, nearly half of SA’s 20m credit active consumers are behind on their payments.