As the UN Human Rights Commission zooms in on the threat to human rights posed by the explosion of private debt, we, as South Africans, should do the same.
Experts are concerned that the adverse socio-economic impact of unsecured loans — loans which are not backed by an asset such as a house — vastly outweighs the benefits of bringing a historically excluded population into the formal financial sector. These loans may be worth as much as R350 billion.
A recently published report on private debt and human rights, to be presented to the UN Human Rights Council (UNHRC) in March, seeks to focus on the human cost of lending.
By framing the debate within the context of human rights, the UN report questions not whether our lending systems are beneficial to shareholders of banks and financial institutions, but whether they are beneficial to society as a whole.
South Africa’s unsecured lending industry exploded into existence after the promulgation of the National Credit Act in 2007 and has fundamentally altered the composition of the domestic credit market.
Between 2008 and 2011, unsecured and short-term credit to consumers grew by 260% to a peak of R28,3 billion, according to data published by the National Credit Regulator (NCR). Levels declined slightly in 2014 and 2016 but are soaring again.
In the second quarter of 2019, R31 billion worth of unsecured loans was granted to consumers, representing 23% of the total value of all loans granted, and surpassing, in nominal terms,…