Daily Dispatch

Postbank loans a risky business, warns BMI


ALLOWING the Post Office, via the Postbank, to extend credit is likely to make it yet another state-owned enterprise in need of a hefty bail-out, BMI Research warned yesterday.

The government recently decided to step up its activity in the banking market by expanding the Post Office’s licence to allow its Postbank subsidiary to offer credit.

Historical­ly, Postbank was only permitted to offer savings accounts, not make loans.

Although South Africa scores highly on measures of basic financial inclusion, with 70.3% of the population having access to a bank account, only 12.1% of the population accessed credit through a financial institutio­n, 2014 data shows.

“In the near term, the biggest risk is that the bank will lack the assets to have a significan­t impact on financial inclusion,” the BMI report said.

“The Postbank will likely attract far riskier borrowers, suggesting potential for notably weaker average asset quality than commercial banks. In a time of economic strain this could see the government forced to step in with a bail-out.

“With SA already facing elevated risks of contingent liabilitie­s from the sizeable guarantees to state-owned enterprise­s, this could exacerbate the state’s challenges.” — BDLive

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