Unsecured lending market continues to grow at a slower rate

South Africa, 10 September 2013 – According to the latest Experian SA data the country’s unsecured lending market continues to grow but at a slower rate.

Some of the factors that have influenced the growth in the unsecured lending market in recent years include the low interest rate environment which is stable at a 38-year low, credit terms increase and the average exposure levels granted to perceived lower risk customers.

Speaking at the 2013 Africa Unsecured Lending Summit in Gauteng, David Coleman, Head of Analytics at Experian SA highlighted that aggregate outstanding balances for unsecured credit – loans valued greater than R8 000, to be repaid over more than 6 months – only grew by slightly more than 3% quarter-on-quarter for the last 2 quarters.

“This is a significant slowdown in growth for this form of unsecured lending that has seen an increase of 64.9% in the last 2 years – with year-on-year growth of 34.7% up to Q2 2012 and 24.3% year-on-year growth up to Q2 2013,” said Coleman.

Macroeconomic data indicates that household cash flows are weak to negative. Price inflation from the weaker Rand is offsetting any income growth. This combined with the planned measures around affordability assessments indicate that the slowdown in growth of unsecured credit extension is expected to continue.

At the same time there is evidence of increasing default levels on unsecured credit. The proportion of active unsecured credit accounts that are impaired have increased from 27.7% in Q1 2013 to 29.6% in Q2 2013 – also significantly higher than the 25.1% recorded last year in the second quarter.  

Coleman concluded: “As focus on affordability gains pace, bureau credit scores will play an even greater role as an indication of indebtedness.

“Furthermore, the combination of these trends highlights the need for companies to think about their collections strategies and the best way to prioritise and execute those strategies, so that they can maximise return on effort and investment. This is where bureau data combined with the right software will play a vital role.”

 

ENDS

Prepared by Meropa Communications on behalf of Experian SA

Contact:

Jonathan Mahapa

Meropa Communications

+27 11 506-7333

JonathanM@meropa.co.za

 

 

About Experian

Experian is the leading global information services company, providing data and analytical tools to clients around the world. The Group helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.

Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended 31 March 2013 was US$4.7 billion. Experian employs approximately 17,000 people in 40 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil.


For more information, visit http://www.experianplc.com.

 

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