Why credit rates and fees need a reality check

Illegal lenders are having a field day as punch drunk consumers turn to them because they do not qualify for credit according to rules that have been in place for almost a decade. Therefore, if we want to stop illegal lenders, we have to review the credit rates.

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Leonie van Pletzen, CEO of MicroFinance South Africa (MFSA), the representative body for the microfinance industry, is urgently calling for a fair and sustainable review of credit rates and fees under the National Credit Act.

She says a review is critical for unlocking financial inclusion, stimulating economic growth and sustaining the formal credit provider industry.

"Despite increasing demand, over 13 million South Africans are rejected every quarter when they apply for credit under the current credit pricing constraints. This is concerning considering that short-term, unsecured credit is used for key developmental purposes."