Wake up to reality in SA, says Capitec
RIAAN Stassen, CEO of Capitec Bank, is “frustrated” that people do not understand the evolution of South Africa’s financial sector.
“Unsecured lending is seen as a swear word,” he said.
But unsecured lending, the form of high-interest loans that his bank dishes out to many of South Africa’s poor, is not about to disappear any time soon.
And in the future, Stassen said, consumers would be less reliant on traditional banks such as Absa, Standard Bank, Nedbank and FNB and use unsecured loans to finance houses and cars.
More controversially, the future of secured credit, whereby loans are backed by houses and assets, was bleak, said Stassen. “It will have to fade.”
The Stellenbosch-based bank is the second-largest player in the unsecured credit lending sector after African Bank.
The political dispensation here skewed the credit market
Unlike African Bank, which has closed the lending taps, Capitec is aggressively growing its loan book. And Capitec has been granting larger loans for longer periods as the economy struggles and unemployment increases.
The Ferrari-driving banker said he was astonished that “traditional bankers” and analysts failed to properly assess South Africa’s credit-lending landscape in a political context.
“I don’t know whether they want to forget the past, but unfortunately the past is here to stay, and especially with regard to credit,” Stassen said in an interview with Business Times.
Capitec is capitalising on the gap in credit created during the apartheid years, when the traditional big four banks did not grant loans to people who did not have assets to put up as surety — a consequence of restrictions on property ownership by black South Africans.
This meant most South Africans relied largely on furniture and clothing retailers for credit. The big four have since woken up to the reality. In recent years Absa, for example, has gobbled up the credit books of Woolworths and Edcon.
Stassen said if one linked South Africa’s political landscape to the credit landscape, it was clear that most South Africans, “black people in particular, had to fund long-term assets with short-term expensive credit”.
The new credit dispensation under the National Credit Act, which came into force in 2007, is trying to address some of the system’s shortcomings.
But people remain locked out of the credit system because there are no title deeds for most of the property held in this country, so banks cannot register a mortgage over the property and it cannot be used as collateral.
Stassen said the country needed to move away from the traditional way of thinking about banking and credit.
The future, he said, was the unsecured banking model, “but unfortunately this industry has been tainted by unregulated players and unregulatable players”.
His bank has been toying with models that measure customers’ risk levels accurately, so that it can offer loans to people to buy houses. “This is a science,” said Stassen.
He said the group was never wrong by more than 2% in its customer predictions.
“That is a reason we continue to extend the period and the values [of loans].”
Nedbank CEO Mike Brown has referred to these longer loans as a sign of “froth” in the banking sector.
Said Stassen: “[Bankers] don’t understand that you cannot compare South Africa to the developed world. And you cannot compare it to even the developing world. The political dispensation here skewed the credit market.”
In recent months, the extent of bad debts at African Bank has caused ripples of concern. Stassen conceded that things could “overheat”, but he quashed talk that there would be a collapse of the unsecured lending environment.
The concern shown by the media and public, he said, was an “overreaction” .