Loan sharks increasing in numbers to approximately 40,000 throughout South Africa
Did you know that South Africa has more loan sharks now than ever before? A recent report conducted by cash loans website lender Wonga, found that there are more than around 40,000 of these non-registered credit lenders operating in South Africa. This represents an alarming ratio of 1:100 for every household.
The report is interesting because it highlights not only how quickly the rate of loan sharks appears to be growing across the country, but also how ‘accepted’ these loan sharks are in society as a whole; there are simply so many in operation now, that many people accept their business in their community as another ‘local essential’.
Does this make people at risk? Well, loan sharks, often called ‘mashonias’ (a word used to describe a loan shark or a loan ‘company’ that has no legal protection,) are associated with intimidating or threatening behaviour when collecting late debt payments. According to Pressreader, they can sometimes keep the borrower’s bank cards or ID until the full debt is repaid, they charge higher interest rates and so it can become difficult for the borrower to ever settle the loan fully. With more people needing to draw on credit at some point in their lives, the chances of encountering these illegal creditors is high, (around 57% needed to apply for credit in 2008 and around 69% used credit in 2017.)
But, As Wonga have highlighted in the study, it seems that this image does not represent all loan sharks. In fact, it would appear that many are ordinary people doing normal business, albeit outside the regulation of the law.
Brett van Aswegen, Wonga South Africa CEO, said, “There is no clear demographic that identifies a mashonisa – they aren’t all big scary men. They are ordinary people from the community who have some cash available and see this as a viable form of employment. Start up cash can be as little as a few hundred rand, but are typically payouts from a retrenchment settlement or provident fund.”
He also says, “Some (mashonisas) said they had more customers today than they did previously due to increased cost of living,” which means it is unlikely we will see these bodies disappear any time soon.
So, why are people using these loan sharks as opposed to licenced lenders? There are various draw factors, including the perception that it is somehow ‘easier’ to use a simple unlicensed firm. The opinion from many people is that proper regulated loan companies charge hidden fees and it can take a while before you receive the money, which is off-putting for some. A loan shark, on the other hand, could potentially get the money to you faster.
In essence, it is important that anyone looking to apply for credit should not be naive about where they apply and who they speak to regarding a loan. Check out the company credentials and research the company in full before using them. If in doubt, avoid them and try a well-established lender brand or name instead.