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Send  Share  RSS  Twitter  12 Oct 2009

: Credit Club Prepare for Economic Rise

 





Recent Gauteng Business News

Standard Bank’s announcement at the beginning of September will have a significant impact on the consumer credit industry. The bank introduced an increased risk acceptance rate in its home loans and credit divisions and other South African banks are following with a similar easing up of policies on lending criteria. This is an indication that the new policies are being implemented in line with anticipated increased economic activity.

The credit industry was predictably affected when the National Credit Act became operational in June 2007 and this effect was compounded by the increased debt burden up to that point.

The new bank policies are being directed at the lower end of the economic spectrum and in particular will benefit first-time entrants into the general credit and housing markets. Borrowing criteria which used to exclude new customers has been relaxed to include them.

Financiers believe that the economic recovery in South Africa will remain slow however there is an improvement in affordability among households, largely owing to reductions in interest rates since December 2008, favourable projections for further interest rate drops and a falling inflation. Consumer spending patterns are being positively influenced by these changes and confidence is returning while financial institutions are taking steps to capitalise on these improvements.

Statistics show that some markets, such as the fashion retail industry have remained consistent both before and after the NCA but, notably, the housing and vehicle markets remain depressed. There is reason for some optimism and consumers are showing renewed appetite for credit for purchases. The new less rigid lending criteria will also lead to positive changes in the depressed markets during 2010.

The latter part of 2009 has seen a slight decline in consumer debt and an improvement in the number of consumers applying for new credit. Two years on from the National Credit Act companies are starting to look at developing application scoring models as a robust development dataset is now available. Leading consumer based organisations are beginning to put in growth policy tests in order to prepare for the expected economic turnaround in 2010.


 
 
 
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