The retail banking industry in South Africa is a highly
competitive market. The depressed credit market coming out of the
financial crisis of 2009 has resulted in local banks embarking on a
more focused undertaking to increase revenue - either through
increased growth into the 'high-risk high-return' market of
unsecured lending, or supplementing the low growth in interest
income with other fee income.
The unsecured lending market has been shrouded with allegations
of reckless lending practices that are non-compliant with the
National Credit Act (NCA). In particular, the
in-duplum rule and coupled with increased provisions, as the
over indebtedness of customers starts to rear its ugly head and the
serviceability of loans comes into question. Not surprisingly, the
major banks are moving away from this market. Amendments to the NCA
are expected to further curtail growth as fixed-cost structures and
credit amnesty are introduced.
