Belinda Beresford
The Micro Finance Regulatory Council (MFRC) deadline for moneylenders to register was Wednesday, but only a fraction of those in the multibillion- rand business complied.
The micro-lending industry is so unregulated that no one knows how many operators there are, although there is general agreement that the industry is worth billions of rands each year.
MFRC acting head Neville Zar estimates there are “between 4 000 and 8 000” micro-lenders. By Wednesday evening, Zar said, “a couple of thousand” had applied for registration. However, the council’s offices had been swamped with applicants in the past few days and he was confident that the number of registrations will rise rapidly.
Professor Piet du Plessis of Stellenbosch University last year concluded there are about 30 000 moneylenders in South Africa, although he admits this is largely an educated guess. Earlier this month Absa assessed the micro-lending industry to be worth about R15,5-billion per year, and said it expected there would be around 5 000 registered moneylenders when the regulatory process had gone into effect.
New legislation this year required all micro-lenders to register with the MFRC by September 15 if they wished to be exempt from the maximum interest rates stipulated in the Usury Act. The exemption allows for loans of less than R10 000 and with a loan period of less than 36 months. The limit had been raised from R6 000 after previous proposals to lift the ceiling to R50 000 had been withdrawn following intense criticism.
The Department of Trade and Industry plans to clamp down on unregistered moneylenders, using the South African Police Service and national and provincial consumer bodies as its own inspectorate.
Next month will see the next round in the legal battle to reverse a Pretoria court’s decision last week to suspend some provisions of the new legislation, including the cap on interest rates. The court also suspended the clauses banning micro-lenders from taking customer’s ATM cards and personal identification numbers. The disputed clauses will be argued in court in mid-October.
There is evidence that illegal and borderline tactics are widespread among some micro-lenders. Clients have been threatened with violence if they don’t repay, have been forced to sign blank forms and have signed away property, including houses, under pressure from micro-lenders.
Duncan Marsh of the Black Sash has also encountered micro-lenders willing to take guns as collateral.
Complaints about moneylenders should be made to the Micro Finance Regulatory Council, at 0860-100-406 from 8am to 4.30pm