South Africans are the most desperate for money in the world

 ·31 May 2015
Debt drowning

South Africans are the most hard-up for cash, ranking as the top country for loans taken out in the past year.

According to data from the World Bank, on average, two in five people around the world took out a loan in 2013-14, with South Africa being the world’s number one country for people needing loans.

86% of adults in the country took out loans during that year, ahead of Iran (80%), Uganda and Kenya (79%), Niger (71%) and the Philippines (70%).

In March, it was reported that half of 19 million credit-active South Africans had impaired credit records, three months plus in arrears, while 15% are described as debt stressed, one to two months in arrears.

As a result, more than 11 million of South Africa’s credit active consumers are described as over-indebted.

Countries with the highest level of loans in 2014

# Country % of population taking loans
1 South Africa 86%
2 Iran 80%
3 Kenya 79%
4 Uganda 79%
5 Niger 71%
6 Philippines 70%
7 Iraq 69%
8 Botswana 69%
9 Zambia 68%
10 Malawi 66%
11 Yemen 66%
12 Israel 64%
13 Cambodia 62%
14 Burundi 60%
15 Bahrain 60%

The World Bank data is based on the responses of 150,000 adults in 143 countries, talking about how and why they access financial services.

The poorest suffer the most

When South Africans run into financial trouble, the most popular go-to destination is family, where 22% of adults indicated that they would turn to their families to borrow money.

Savings accounts (22%) were the next best bet, followed by seeing aid from employers (4%), personal lenders (2%) and financial institutions (1%).

Lenders in South Africa have come into the spotlight in the past for being too ‘liberal’ with small, unsecured loans, particularly among the poorer communities.

Unsecured lending and micro-loan schemes were identified as major problems that plagued Marikana in the North West during the labour unrest in August 2012.

Of the poorest 40% in South Africa, 87% of adults had to borrow money in 2014 – also the highest rate in the world.

Historically, in South Africa, the poor had been unable to obtain loans because they had no assets as security, which was where micro and unsecured lending had stepped in.

However, research by the SA Human Rights Commission (SAHRC) indicated that these types of loans are being used for consumption.

With a faltering economy, cash-strapped consumers were struggling to pay back loans, and getting trapped in a poverty cycle and debt trap.

In 2009, studies showed that 40% of the money from micro finance was used to buy food and many borrowers were taking new loans to pay old ones, the SAHRC said.

From 2007 to 2012, outstanding unsecured credit in South Africa increased from R41 billion to R159 billion.

The World Bank data shows that South Africa has the highest proportion of borrowing from informal lenders among the poorest 40% of the population out of all the countries in the world, at 24%.

Countries with the highest level of informal lending among the poorest 40%

# Country % of informal lending among the poorest 40%
1 South Africa 24%
2 Saudi Arabia 22%
3 Iraq 21%
4 Nepal 21%
5 Yemen 19%
6 Cambodia 19%
7 Myanmar 18%
8 India 16%
9 Dominican 16%
10 Panama 15%
11 Kuwait 15%
12 Malawi 14%
13 South Asia 13%
14 Bahrain 13%
15 Haiti 11%

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