South African banks, which account for the majority of loans issued, may have no idea how deeply indebted their customers are, Business Report said on Friday.
This is the view of Carel van Aardt, a professor at Unisa’s Bureau for Market Research (BMR).
According to Van Aardt, the BMR conducted a study on the extent of indebtedness on behalf of one of the banks, and the findings pointed to higher levels of debt. This cast doubt on the official debt-to-income ratio of 76%, recently given by the South African Reserve Bank.
While Van Aardt could not disclose the details of the survey, he highlighted some of the survey’s observations.
The study showed that consumers had a tendency to use more than one bank to access credit. In such cases, a consumer would access multiple credit-type products. A consumer would typically use one facility and, once this was exhausted, ”migrate” to another bank.
Van Aardt’s view of high debt levels was echoed by another study commissioned by Credit Suisse Standard Securities (CSSS). The brokerage firm found that debt burdens of households ranged between 95% and 135%, well above the official 76%.
Gabriel Davel, chief executive of the National Credit Regulator, said lenders have a 90% chance to determine the extent to which a prospective borrower is indebted in their first interface with the customer.
This requires the consumer’s pay slip, bank statement and credit-bureau record, and credit providers have to perform an expense test on the borrower. — Sapa