New data published by a leading credit bureau, Compuscan, reveals the extent to which South Africa’s struggling economy has impacted credit-active consumers.
Compuscan said that a number of economic factors that steered the country towards a near downgrade by international credit rating agencies have not only played a role in the weakening of the rand, job losses and hikes in fuel and food prices, but have also contributed to testing times in the credit sphere.
The following table indicates the quarter-on-quarter percentage change of various account types that were listed as 3+ months in arrears.
Most notably, there was a 19% increase in Vehicle and Asset Finance (VAF) accounts that were 3+ months in arrears.
Percentage change in 3+ delinquency from Q4 2015 to Q1 2016:
|Fixed term agreements
|Fixed term loans (unsecured)
|Fixed term loans (short term)
Looking more closely at VAF accounts from quarter to quarter, the trends suggest that credit providers may have been reluctant to grant VAF loans of medium to high value, Compuscan said.
“This was very likely due to concerns about consumers not being able to afford this debt. There was a remarkable 29% decrease in the number of VAF accounts between the value of R400,001 and R999,999 recorded on the bureau, compared to the previous quarter,” the credit bureau said.
Similarly, there was a 20% decrease in the number of these loans to the value of R1,000,000 and more, and a 13% decrease in the number of VAF loans between the value of R250,001 and R400,000.
“These changes likewise point to the fact that consumers, even those of higher income brackets, have been affected by increases in the cost of living,” Compuscan said.
There was however, a dramatic 156% increase of VAF loans to the value of R50,000 or less. There was also a 16% increase of this loan type between the value of R51,000 to R100,000 and a 10% increase of those between R101,000 and R250,000.
“This reiterates the possibility that those who might ordinarily have qualified for loans over R250,000 were not able to do so and thus had to settle for a loan of a lower value.
Naturally, higher living costs tend to affect those within lower income more severely, and something of the impact can also be seen on the bureau.
There was a 32% decrease in the number of fixed term (short term) loans that were classified as current as at the end of the first quarter and, as is indicated in the above table, there was an 11% increase in the number of fixed term (short term) loans that were 3+ months in arrears.
Jacobus Eksteen, senior data analyst at Compuscan stressed that there could be other factors at play which would influence consumers’ ability to obtain loans of various kinds. These could include stricter lending criteria implemented by credit providers due to new regulations and concerns over consumer risk.
The number of credit-active consumers remained steady, with a 2% increase, from Q4 2015 to Q1 2016, to 27.5 million consumers with accounts, judgments or notices listed on the bureau.
Amongst these consumers, there were 70.7 million accounts recorded on the bureau as at the end of the first quarter or the year, and of these only 48.6 million were classified as paid up to date. This reflects a 10% decrease, quarter-on-quarter, in the number of current accounts listed on the bureau.
At the end of the first quarter, there were approximately 146,000 consumers that had been declared over-indebted and that were subject to the debt counselling process. Around 2.8 million consumers were 3+ months in arrears with account payments.
“Although we encourage access to credit due to the fact that it opens up doors to opportunity which ultimately benefit the economy, the onus is on the consumer to honestly declare the correct information during the affordability assessments carried out before credit is granted,” said Eksteen.
“On a positive note, we have seen what we believe is a greater awareness amongst consumers of the need to improve their credit behaviour. We recorded a 15% increase in the total number of credit reports requested from Compuscan during the first quarter,” the data analyst said.