South African banks under fire

South Africa’s banks are facing accusations of discriminating against certain groups of people when handling loan applications.

The Banking Association of South Africa (BASA) released its report about the industry’s transformation, and it says that it has reached some of its targets.

It explained that black people comprise 48% of board directors and 90% of junior management, above its target of 80%.

However, banks fell short of their senior managers’ targets of 60%, only reaching 51% and 36% of top senior managers.

While BASA maintained that lenders are ahead of the set targets, lawmakers and critics contend that the pace of transformation is too slow, and changes are symbolic rather than substantive.

“The scorecard doesn’t effectively measure outcomes of banks’ transformation and empowerment efforts,” said Mary Vilakazi, BASA’s chairperson and FirstRand CEO.

Both input and outcomes should be measured to ensure the programs “are making a real difference,” she said.

South African banks are also facing questions about their lending practices, with some alleging that banks are using race as a criteria to decide who they give loans to.

Bongiwe Kunene, MD of the Banking Association South Africa, stressed on The Money Show with Stephen Grootes that banks are not doing this.

“In terms of banking practices and in terms of the law, banks cannot discriminate,” Kunene said.

Banks are not allowed to treat people differently based on factors such as race, class or gender – and the numbers should also show that this isn’t happening, she added.

On top of that, only 316 complaints of this nature have been levelled against banks to the National Financial Ombud Scheme (NFO).

“If this was common practice, it would be more than that. So there isn’t any statement of truth or fact that would say that banks are discriminating against a particular class of citizens.”

However, this doesn’t mean that there isn’t any difference in how banks treat clients of different income brackets when it comes to giving out loans.

According to Kunene, this is largely related to credit history and the information that banks use when they look at any credit application.

“The data points would always be better for someone who’s had a bank account for longer, for someone who has borrowed in the past, for someone who has a record of what they are doing and the relationship that they had with the financial services provider – it doesn’t matter the name of the institution.”

“All of these become the data that gets to be used in evaluating whether the loan is justified or not.”

Notably, this is not the first time that BASA has had to deny claims of this nature.

Last year, BASA rejected allegations of unfair discrimination in home loan approvals from the Department of Human Settlements.

Human Settlements Minister Mmamoloko Kubayi proposed amendments to the Home Loan and Mortgage Disclosure Act (HLAMDA) which would mandate banks to disclose detailed reasons for declining home loans.

Kubayi argued that this would help address potential racial profiling and unequal access to housing finance.

She explained that historically disadvantaged persons (HDPs) experience significantly lower mortgage approval rates and receive smaller loan amounts compared to previously advantaged persons (PAPs), which perpetuated economic inequality.

BASA, however, insisted that affordability, adverse credit records, and insufficient collateral are the primary reasons for loan rejections, not race.

It said that banks operate under strict regulatory frameworks to protect depositors’ funds and ensure responsible lending.

The association also argued that high interest rates, economic hardship, and the affordability gap in the housing market are the key barriers to homeownership, particularly for low- and middle-income earners.

While BASA acknowledged historical inequalities, it maintained that systemic discrimination allegations were unfounded and warned that forced disclosures could compromise customer privacy.