South Africa has a large number of consumers who are failing to honour their debt obligations. According to the latest data from the National Credit regulator, of South Africa’s 25.46-million active credit consumers, 9.7-million can’t keep up with their debt payments.
However, even this shocking number hides the true extent of the issue, as it doesn’t factor in how many consumers turn to loan sharks, known as mashonisas. A report published by Wonga Finance SA, looking at informal lending practices in South Africa, estimates that there are about 40 000 mashonisas operating throughout the country.
Mashonisas play a big role in plugging financial shortfalls when formal credit taps run dry as they offer a channel of credit to those who do not have access to formal credit. But this simple, accessible, and almost instant pay-out structure — which is the main reasons consumers turned to them — comes at a high price. Wonga found that most mashonisas charge between 30% and 50% interest, with loan term agreements ranging from a week to a month.