This is an excerpt of the report that was written by Antony Sguazzin in Bloomberg News last week Thursday, the 12^th of September 2019. I suggest you read the full article entitled “SA unsecured loan boom leaves 40% of borrowers in default”. It is based on the study done by Differential Capital

• 7,8 million South Africans have borrowed a combined R225 billion in loans without collateral. This is mostly for short-term needs e.g. furniture, urgent family care, cars, etc..
• 40% of borrowers of unsecured credit have defaulted on their debt repayments
• Dysfunctional industry where lenders compete on the largest loan size, NOT consumer value, preying on financial illiteracy of the market
• Reckless lending is almost systemic
• The industry is highly profitable despite the high number of defaults due to “extortionate pricing” & rescheduling of loans that are in default
• Interest charges, once all associated costs are included, range from an annual rate of 225% for one-month loans to 34% for five-year loans. Two-thirds of customers pay more than a quarter of their net income to service their loans, the report said.

Biggest lenders 
Capitec Bank is South Africa’s biggest unsecured lender. While the country’s big four – Standard Bank, Nedbank, Absa Group and First National Bank  – also offer unsecured loans, their affordability tests are more stringent, it said. The South African Reserve Bank, which oversees banks, declined to comment.
Capitec focuses more on longer-term debt with between 60% and 70% of the money it has lent out used for needs such as education, vehicles and establishing businesses, said Capitec CEO Gerrie Fourie

Indebted miners 
300 000 of the industry’s 450 000 workers have had unsecured loans and spend an average of 48% of their wages paying off debt, Differential said. In 2012, the extreme indebtedness of miners was seen as one of the root causes for violent labour unrest that culminated in the massacre of 34 strikers at Marikana. In 2014, African Bank Investments, the biggest unsecured lender, went bankrupt. 
“In South Africa, financial inclusion through micro-credit has become financial enslavement through debt traps,” Differential said. “Expensive loans used for consumption purposes create a transfer of wealth from the borrower to the lender – in South Africa’s case from the poor to the rich.”