South Africans are now borrowing money from friends and families and turning their backs on the banks to provide them with cash in times of trouble.
Old Mutual’s (OM) latest Savings and Investment Monitor suggests a sharp year-on-year decline in the number of personal loans from financial institutions in 2017, down to 14% from 21% of all loans. This reflects the lowest percentage point in five years of surveys.
The financial services sharks (OM) sampled households in the main metropolitan areas of Johannesburg, Pretoria, Cape Town, Durban, Port Elizabeth, East London and Bloemfontein looking at households with an income between R3,000 per month to more than R40,000 per month.
The BusinessTech website reports the sharp drop in the number of people seeking loans from banks can be interpreted in a few ways: either consumers are actively moving away from banks as a source of funding – or the banks themselves are simply declining loans.
With the country’s current economic woes, banks may not have confidence that consumers can repay their debts – forcing them to turn to other means.
In comparison, the number of personal loans from family members has steadily increased over the past five years; despite showing a slight drop from 15% in 2016 to 13% in 2017.
BusinessTech says it should also be noted that as many as two thirds of South Africans are unbanked, and they make up a portion of those who lend from families/friends or partake in stokvels and the like.
Sadly, the number of desperate people turning to micro lending parasites has also increased.