People are managing debt better – survey

It’s a mind-set shift towards borrowing

Fewer South Africans are taking loans from banks‚ microlenders and family‚ despite increasing financial pressures.

This is according to the latest Old Mutual Savings and Investment Monitor – conducted yearly with 1 000 people who bank with various institutions around the country.

It also revealed that South Africans are starting to manage debt better‚ signifying a slight mind-set shift towards borrowing money.

The research‚ conducted in face-to-face interviews with clients in major metros during April and May‚ revealed that personal loans from financial institutions have dropped from 21% in 2016 to 14% this year.

Micro-lending loan arrangements are also slightly down from 8% to 6%‚ while borrowing or taking loans from friends and family dipped from 15% to 13% – between 2016 and 2017.

Research manager at Old Mutual‚ Lynette Nicholson, said: “There is a very likely link between this small shift in mind-set and the encouraging decrease in income to debt ratio recently reportedly by the South African Reserve Bank.”

She believes this shift in behaviour reflects South Africans’ “growing awareness of the serious implications and vicious financial consequences of bad debt‚ and a better understanding of the importance of reducing debt as fast as possible”.

“However‚ due to the strained economic conditions‚ South Africans are finding it increasingly difficult to save for their futures.”

The monitor also found that only 44% of working parents were saving for their children’s education‚ down from 46% last year.

Only 34% are feeling confident in the economy while 33% still believe that the government will take care of them when they are no longer able to take care of themselves.

Economist Mike Schussler said consumers were becoming more savvy about managing debt‚ learning from debt counsellors‚ personal experiences and education drives.

“I honestly also think that banks have become more careful lending to consumers. Also, interest rates are high in real terms and consumers can see that it is expensive to borrow.

“While one can argue that consumers are not getting loans from banks‚ consumers have also learnt about expensive credit from micro-loans in particular‚” said Schussler.