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Media Info
 Wrong time for banks to curb credit, say debt
20 May 2009
KGOMOTSO MATHE
Staff Writer
ALTHOUGH the effects of the credit cycle on the South African economy were limited , debt counsellors Consumer Assist yesterday criticised commercial banks for contributing to an already gloomy economic picture by cutting credit extension.
Consumer Assist said the banks' approach was unfortunate at a time when the housing market was under threat and millions of consumers were saddled with debt.
The counsellors said the banks' decrease in lending to businesses had had a negative effcet on job creation, resulting in an increase in bad debts.
"Banks have become too strict in how they issue credit and that has a negative effect on economic activities," said CEO Andre Snyman .
Fewer jobs were created and consumers were sinking into financial problems, he said.
At the end of last year, 7,3-million people in SA had financial problems, with at least 12,7% having already been issued with judgments.
According to Consumer Assist, banks are repossessing at least 2000 houses and about 6000 vehicles.
"Even though the interest rates have been reduced, banks are now revising their facilities, issuing fewer loans and aggressively pursuing the indebted," said Snyman.
Consumers did not budget for high interest rates, and banks should be able to find a way, without harming their business, to accommodate those affected by the changing environment, said Snyman.
"Clearly banks still think that future impairments are likely to be high, which is why they are reducing their credit lending rate," said head of equities at Afena Capital Khaya Gobodo.
"The irony is that at the peak of the credit cycle that's when banks were extending credit and only at the bottom are they decreasing it," he said.
Gobodo said it should be the other way around because people who borrow money now are less likely to default in the future.
The banks' umbrella body, the Banking Association of Southern Africa, denied banks had made lending criteria too tough.
"It's an incorrect impression that banks are too tight with issuing credit. We are actually party to a process between government and Nedlac to try and afford credit to some firms that are important to the economy," said MD Cas Coovadia. "We are trying to see if the government can share the risk with us," he said.
Coovadia said banks would at the end of the month launch an initiative with the country's debt counsellors to restructure the levels of debt. "I'm actually surprised by these accusations because we are working together with them," he said.
mathek@bdfm.co.za
FOR FURTHER INFORMATION www.consumerassist.co.za 0861 21 22 23 debt counselling call centre
Andre Snyman - CEO - Consumer Assist
aurelia.espag@consumerassist.co.za / 011 654 6018 (Languages: English, Afrikaans)
Source: MediaOnLine
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