Finance: Mounting international financial crisis
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The decision by the four major banks to return a portion of the money they deducted from clients who were indebted to them were welcomed by the micro lending industry.
The practice, in terms of which banks deducted the entire salary of many clients, was slammed by the banking ombudsman because it left these individuals without any money to live on.
Dr Eddie Stoop, CEO of the Elite Group, an affiliate of the AltX listed New Dawn group and a major player in the micro lending industry, said it should serve as a warning to certain micro lenders who were guilty of the same practice.
“While it may not be in the letter of the law of the National Credit Act, it is certainly in the spirit of the law to act reasonably at all times and as far as we are concerned it is unreasonable to garnish the entire salary of a debtor.”
Stoop said the micro lending industry had not been affected at all by the global financial crisis and kept showing healthy growth.
“As banks have become much more careful in granting loans, there has been a steady migration away fro banks to the micro lending industry because we in most instances offer unsecured loans at rates much the same as banks charge for short-term loans,” Stoop said.
He said that while the housing market has seen significant decline, the incremental loan industry where owners of low cost housing borrow amounts of up to R20 000 to renovate their homes in stages is booming. Astonishingly the default rate on these loans is below two percent.
Business News Sector Tags: Finance|