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CREDIT GROWTH EXPECTED TO SURGE

04.02.2010

Credit growth would start improving off a low base this year as consumers responded to lower interest rates and banks gradually eased requirements, an economist said yesterday..

However, Dennis Dykes, the chief economist at Nedbank, said demand for company loans would remain relatively weak given the downturn in private sector investment that was to be expected at this stage of the economic cycle..

"Private sector credit will probably rise by about 5 percent over the year," said Dykes. "This will be mainly in consumer credit, and within that, mortgage advances and other asset-backed finance. However, the low base in 2009 will also provide some support."

Bloomberg reported that Nedbank had said lending to mining firms might halve from a record last year when mines rushed to sell stakes before the government deadline to boost black ownership..

"Last year was quite a good year for us with transactions worth as much as R7 billion," said Mark Tyler, the co-head of mining and resources at Nedbank Capital..

Maria Ramos, the chief executive of Absa, said demand for credit had declined. She said consumers were not streaming into the bank's branches as they were more careful about taking on more debt.

- By Mzwandile Jacks.

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Latest News:
SA DECEMBER CREDIT DEMAND FALLS

01.02.2010

Demand for credit by South Africa's private sector fell for the third consecutive time in the year in December, showing spending by households and companies remains subdued and backing the case for lower interest rates. Consumers in Africa's biggest economy remain wary of debt in the aftermath of the country's first recession in two decades last year, which slashed nearly one million jobs.

Central bank data on Friday showed that credit demand shrank by 0,76% year-on-year in December after a record contraction of 1,59% in November and the previous month's 0,42% drop -- the first decline in more than 40 years.

Growth in the broadly defined M3 measure of money supply, however, quickened to 1,62% compared with 0,58% year-on-year growth in November.

"The numbers are clearly not too far off consensus and I think overall it doesn't show any change in the underlying dynamics driving money supply and credit, which are that they remain very subdued, very benign," said Russell Lamberti, strategist at market analysts ETM.

"We are likely to see a very stable money and credit environment at least for the first half of this year and possibly even for the whole of this year. Overall we think that is going to continue to act to drag down inflation and keep calls for further interest-rate cuts intact."

The central bank left the repo rate unchanged at 7% on Tuesday, the fourth consecutive time it has held rates after slashing them by 500 basis points between December 2008 and August last year to help the economy back onto its feet.

The central bank said proposed electricity tariff increases of 35% over the next three years posed the greatest risk to the inflation outlook.

But Governor Gill Marcus left the door open for a rate cut, saying some of the bank's seven-member policy committee had argued strongly for a reduction to help South Africa's debt-laden households.

- Business Report.co.za

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Latest News:
MISSED PAYMENT "A SURE SIGN"

24.12.2009

Johannesburg - FNB's Credit Card Division on Monday advised consumers not to miss any credit card payments.

"The first sign that indicates that consumers are currently debt stretched includes defaulting on any credit payments, including credit card repayments," FNB's Credit Card Division said in a statement.

"Any form of a missed payment on a credit card raises concern for the bank," head of credit risk Darryl Lahner said.

"It is under this circumstance that the bank considers protecting both the customer and the bank by reducing a customer's credit limit."

Lahner said regular missed payments were a clear indicator that a customer might be under financial strain.

"It is important for customers to realise that the bank monitors missed payments regularly."

"These are not limited to credit card repayments, but include any form of missed payment on any of the other banking products," he said.

Lahner stressed that consumers should not view a credit limit reduction as a form of punishment from the bank.

"Rather, the bank is acting as a responsible lender, by preventing customers from falling deeper into debt."

Bank's statistics revealed that fewer customers defaulted on their payments once their credit card limit was reduced. "Initially customers are not happy, however most customers end up thanking the bank for the lifeline as it helps in protecting their credit bureaux profile," Lahner said.

The bank advised customers via SMS about any credit limit reductions.

"Customers would receive the communication early in the day avoiding any form of embarrassment at point of sale before using their cards," he said.

Customers were also encouraged to approach the bank should they need a credit card limit increase.

"The bank is willing to share and reassess with the customer concrete reasons considered leading to the credit limit reduction or increase."

He explained that if consumers were planning an overseas trip, they could ask for a temporary higher credit limit.

Some consumers might want to limit their exposure to possible fraud by decreasing their credit limit, he said.

- www.Theretailer.co.za

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Latest News:
FINSCOPE SOUTH AFRICA HAVE RELEASED THEIR 2009 SURVEY OF FINANCIAL USE AND BEHAVIOUR IN SOUTH AFRICA

24.11.2009

FinScope SA 2009, a study to monitor use and perceptions of the financial sector in South Africa, was conducted by TNS Research Surveys, South Africa's leading marketing insights company, on behalf of FinMark Trust and syndicate members. Face-to-face interviews were conducted among 3 900 South African residents aged 16 years and older, between July and September 2009. A nationally representative sample was drawn, which was weighted and benchmarked to the 2009 mid-year estimates based on 2007 Community Survey estimate information.

In 2009, the banked population decreased by 442 000 people or 2.2 percentage points to 19.6 million despite a 2.5% growth in the population of 16 years and older from 32.0 million to 32.8 million. This is the first year since the survey was implemented in South Africa in 2003 that a drop in the banked population has been observed. South Africans have returned to banking levels similar to those observed in 2007: 60% of the population are banked as opposed to 63% who were banked in 2008. Those never banked have risen by 7% and those previously banked but are no longer banked have risen by 22%.

The percentage of people in LSM 1-5 who are banked has dropped from 49% in 2008 to 44% in 2009. In addition, the percentage of banked people who earn less than R1000 per month has dropped from 39% in 2008 to 32% in 2009. The main reasons these people cite for not being banked are that they have no job (57%) and that they have no money to save (40%). The percentage of banked people who earn R1000 to R1999 per month has dropped from 77% in 2008 to 67% in 2009. The main reasons these people cite for not being banked are not having a job (31%) and having no money to save (37%). This is unfortunate especially since there has been a concerted drive to open the banking sector to lower income groups. However, since many lower income people simply use a bank account as a place to "park" savings safely, when low incomes or a lack of disposable income causes savings to drop, the need for a bank account falls away. The challenge is to increase the depth of usage and promote the benefits of banking beyond a savings device. A time when every rand counts also means that fees may become a bigger issue, and raises the question of whether bank accounts as currently structured are out of reach of low-income earners.

One of the more positive findings of the 2009 study has been the growth in usage of the Mzansi account, launched in 2004 to cater for the lower LSM market and encourage more people to become banked. Thirteen percent of South Africans have an Mzansi account, compared to 11% who had the account in 2008. This year, we see that two out of three Mzansi holders say that their Mzansi account is their first bank account. In addition, one in four Mzansi holders claim to have opened an Mzansi account to receive a government grant.

On Financial literacy, the survey revealed that there are still high levels of misunderstanding of key financial terms, particularly in the arena of debt. Knowledge of terms relating to debt, credit and the National Credit Regulator (NCR) have decreased slightly, and knowledge relating to the National Credit Act (NCA) specifically, is low. Although the NCA is still relatively new, it is discouraging that there is no improvement in consumer knowledge. Only 24% of people had heard of the NCR or NCA and knew what these terms meant. Forty-one percent have heard of and know what bad debt means, 30% have heard of and know what personal credit record means and 25% have heard of and know what counselling about debt means.

The need for more financial education and training is clear, although slow progress is evident in the 2009 data. The decrease in knowledge about the National Credit Act is of some concern. Indeed, on all issues regarding the use of credit in any form, there is a clear need for greater financial literacy.

- FinScope South Africa

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Latest News:
MORE IN COURT OVER DEBT

24.11.2009

Johannesburg -Increasing numbers of people are being summoned to appear in court over bad debt.

In September alone, 59 588 civil judgments for debt amounting to R640.4m were handed down, according to data released by Statistics SA on Thursday. This is a 5.4% increase on the same month a year ago.

According to Quantec's chief economist Christo Luus, the debt burden faced by many consumers is still too onerous, even though the economy is moving out of a recession.

He said the latest debt numbers can be attributed to the fact that many people have lost their jobs during the past year. "There was an 800 000 reduction in employment numbers [this year], and most of those people had debts. It's evident that if you don't have an income you can't service your debt, even when interest rates have come down quite a bit."

Luus said the figure could have been higher if the number of consumers under debt review were included. The debt review process allows over-indebted consumers to have their repayment schedule revised under the supervision of a debt counsellor, without having to face a lawsuit.

In September the National Credit Regulator (NCR) said 100 000 consumers owing R20bn (of which R12bn were for mortgages), were undergoing debt counselling.

According to the NCR's latest Credit Bureau Monitor - which only has data up to June 2009 - credit bureaus had records for 17.79 million credit-active consumers. The percentage of consumers in good standing was 55.9%, while the number of consumers with impaired records was 7.85 million at the quarter ended June 2009.

- Fin24.com

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Latest News:
MIDDLE EAST CREDIT ASSOCIATION SET UP TO SHARE REGIONAL DATA

24.11.2009

UAE. In a move to support the development of credit bureaus and enhance credit information sharing across the region, credit bureaus based in the UAE, Bahrain, Oman and Pakistan have come together to establish the Middle East Credit Reporting Association (MECRA), a non-profit association of credit information suppliers in the Middle East.

This announcement was made today by the founding members of the association and coincides with the workshop on Developing Credit Bureaus in the Arab World organised by the Arab Monetary Fund (AMF) and the International Finance Corporation (IFC), which will be held in Abu Dhabi on 9 November 2009.

MECRA has been established to create awareness and promote the credit reporting industry in the region.

The association will grow to facilitate the exchange of credit information on individuals and commercial entities between its members within the guidelines of each bureau and the local laws and regulations of each country. Further, it will serve as a knowledge-sharing platform on credit bureau operations and data sharing best practices.

MECRA's articles of association were signed on November 8, 2009, by Emcredit and other founding members, including BENEFIT Company, Bahrain; National Bureau of Commercial Information, Muscat; and Credit Chex, Pakistan. The composition of board of directors and the appointment of the chairman of the board will be announced shortly.

Membership to MECRA will be open to public and private entities in the region that are involved in the collection and distribution of credit information. The association offers full membership as well as associate membership.

"MECRA is a significant step towards a regional alliance that will promote knowledge sharing in the credit information industry - a catalyst for economic growth," said Ali Ibrahim, Managing Director, Emcredit.

"The challenges resulting from the global financial crisis have highlighted the need for stronger risk management practices. As well, the transient population of our region necessitates greater collaboration between regional credit bureaus so that credit data can be used effectively to empower business and financial decisions.

"As we aim to make MECRA the unified voice for all credit reporting agencies in the region, we encourage other regional credit bureaus to join the association, so that it can represent the interest of regional credit bureaus to an international audience."

For his part, Hamad Salem L. Al Neaimi, Executive Director for Commercial Affairs at the Abu Dhabi Department of Planning and Economy, and President of the organising committee for the Doing Business Forum, said: "We welcome the creation of the Middle East Credit Bureau Association and value the impact that credit bureaus have on easing access to credit, and in turn reviving economic growth.

At a UAE level and in accordance with the instructions of the Abu Dhabi Executive Council, we will continue to work on improving the doing business environment in Abu Dhabi and on assisting Emcredit in expanding its coverage to create a world class credit information infrastructure in the UAE, a critical element that will help enhance the UAE's position in the Doing Business Report ranking."

Robin Watson, Assistant General Manager of Benefit, said: "We have always worked closely with the regional credit reporting industry and are pleased to be a founding member of MECRA. There is much to be done in the region in enforcing best practices in credit bureau management, standardisation of the regional credit reporting industry and the development of comprehensive reporting solutions. MECRA will be playing an active role in all these areas."

Miguel Llenas, General Manager of National Bureau of Commercial Information, which was set up in June 2008, said: "The credit referencing industry is an important part of any economy.

It brings immense long-term benefits for banks, financial institutions, small and medium-sized enterprises, commercial-sector participants and consumers. Joining MECRA will give us an opportunity to play a pivotal role not only in boosting the credit sharing environment in Oman but also in the wider region."

Nabil Mweis of Credit Chex, Pakistan, said: "Pakistan has long-standing ties with the Gulf. With a large Pakistani population residing in the GCC, and various business and trade relations with the region, the relevance of our joining MECRA is significant. This also paves the way for facilitating future cross-border data sharing agreements."

- BI-ME , Author: BI-ME staff

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