Alarm over unsecured loans
THERE has been rapid growth in unsecured credit in the Lewis Group's lower and lower-middle target market, the furniture retailer's chief executive, Johan Enslin, said yesterday.
Enslin joins a string of industry players raising the alarm on the surge in unsecured lending, which some say places SA on the slippery slope of a credit bubble risk.
Unsecured lending is the granting of credit without assets being provided as security, at higher borrowing rates.
It is a high margin business that until recently was dominated by small lenders.
But bigger banking players are increasingly eager to grant credit facilities to highly indebted consumers.
Enslin said debt consolidation products could also "cause a problem" going forward.
According to the national credit regulator unsecured credit increased from just more than R21-billion for September 2011 to just more than R26-billion for December 2011, a quarter-on-quarter increase of 24.69%.
Earlier this week the country's biggest micro lender, African Bank, said experience had shown that wherever there was a rapid expansion of credit markets, heightened caution was required.
Speaking on unsecured lending, Finance Minister Pravin Gordhan in April said that if the increase in SA's unsecured loans were loans meant for consumption and not investment by households and businesses, then the increase was "worrying".