South Africans must be protected against unaffordable loans – Capitec CEO

Capitec CEO Gerrie Fourie said the National Credit Regulator (NCR) should do more to protect borrowers and lenders by regularly adjusting credit regulations to prevent overlending.

In the bank’s recent results presentation, Capitec said its loan approval rate was 40%, meaning it will approve 40% of clients who apply for a loan.

However, Capitec’s take-up rate – the percentage of clients that accept the loan amount they are offered once approved – is only 20%.

He used the example of a client who applies for a R100,000 loan but is only offered a loan of R50,000 and does not take it up.

Fourie said this implies clients are “shopping around” and looking to different sources for easy credit.

He said clients are increasingly turning to retail cards and microlenders for short-term loans, as there has been a drop in the average loan size. He views this trend as a threat to Capitec and a risk to “everyone”.

“I think it’s a threat to everyone because if you start going into the shorter-term loans, it’s fairly expensive, from 5% to 60% per month.”

If a client cannot afford such expensive loans anymore, it presents a risk to both the lender and the borrower.

Fourie said banks like Capitec are far stricter and more weary when approving loans, particularly short-term loans.

“We allow a lot on household expenses, we deduct quite a lot, which other people don’t do, and then you overlend,” he explained.

This is where Fourie believes the NCR should do more to prevent this. “You need to adjust your prices and your credit regulations regularly, and it hasn’t been done,” he said.

He used the example of regulations surrounding minimum expenses that the NCR has not adjusted in five years. “Surely you must adjust that for inflation?” he asked.

“It’s those types of things that they’re not doing, which we need to do, and we’ve communicated it,” he said.

“So one needs to look at that to make certain that the client is protected.”