Unsecured loans the way out for many

UNSECURED credit is an unlikely hero in the story of how ordinary South Africans are trying to rise above the current economic and education crises facing the country, according to the latest UCT Unilever Institute Aspirations Report released in Durban.

John Simpson, professor of advanced marketing at the UCT Unilever Institute, said all income groups in South Africa were facing an unprecedented crisis of aspirations and income immobility” fuelled by the current economic, political and education turmoil rocking the country.

It was widely acknowledged across income groups that education and entrepreneurship were two levers that could push one upwards economically, and that unsecured credit had a major role to play in funding these two endeavours.

The study based on 8 000 interviews across five income groups found that most South Africans were still part of the pre-middle class, whose aspirations to break into the middle class were largely dependent on the quality of education and other economic drivers they could afford.

Asked what was holding them back from reaching their aspirations, they name lack of jobs, lack of assets which give them access to secured credit, black tax” and lack of access to quality education.

Informal forms of finance such as borrowing from family and unsecured credit are used to fund a bridge into the middle class, such as education, making home improvements in order to rent out rooms, buying a car (which provides mobility, access to more job opportunities and ability to generate income) in order to qualify for a better job, starting a small business from home, getting off the grid to become selfsustaining, and playing asset catchup including paying a deposit on a lowcost house.”

The study revealed that only 12% of respondents relied on bank loans, while 22% believed starting their own business would improve their fortunes. In addition, 38% felt that family responsibilities were holding them back. UCT Unilever Institute