South African consumers are increasingly choosing to borrow money from their friends and families according to Old Mutual’s latest Savings and Investment Monitor report.
The financial services firm sampled households in the main metropolitan areas of Johannesburg, Pretoria, Cape Town, Durban, Port Elizabeth and East London and Bloemfontein.
The comprehensive household income sample ranges from less than R3,000 per month to more than R40,000 per month.
The report noted a sharp year-on-year decline in the number of personal loans from financial institutions in 2017, down to 14% from 21% of all loans. This reflects the lowest percentage point in five years of surveys.
The sharp drop in the number of people seeking loans from banks can be interpreted in a few ways: either consumers are actively moving away from banks as a source of funding – or the banks themselves are simply declining loans.
With the country’s current economic woes, banks may not have confidence that consumers can repay their debts – forcing them to turn to other means.
In comparison, the number of personal loans from family members has steadily increased over the past five years; despite showing a slight drop from 15% in 2016 to 13% in 2017.
It should also be noted that as many as two thirds of South Africans are unbanked, and they make up a portion of those who lend from families/friends or partake in stokvels and the like.
The number turning to microlenders has also increased.
The statistics showed that the majority of loans were still less than R6,000; however, in line with the above statistics, there has also been a steady increase in the amounts being borrowed by family members, peaking in 2016.
The one statistic that has seen a gradual decrease is the amount of time borrowers are taking to pay back their personal loans to families and friends. Old Mutual noted that this is likely a combination of lenders calling in loans earlier and borrowers choosing to loan the money or shorter periods of time.