“If you use credit for capital expenditure it’s probably a very good thing. If you are using credit to spend on a holiday that you can’t afford that’s not a good thing,” he said at the SA Savings Institute’s (Sasi) briefing on its festive savings campaign.
“We would like a healthy credit market. Credit is neither good nor bad, it depends on what you use the credit for.”
Unsecured credit was “one of the flavours of the year”, he said, and the NCR had looked at it very carefully.
“It’s not necessary bad if unsecured credit gives people who were previously unable, the access to the credit market.”
Certain providers even now specialise in unsecured credit, he added.
“It’s also the most lucrative form of credit due to the way the market works.”
What the regulator was concerned about, however, was that consumer rights could be adversely affected through “reckless credit” as unsecured credit was risky by nature.
“We can’t give reckless credit. The person taking credit must be able to afford it.”
There will be certain guidelines in line with unsecured credit for lenders by the NCR.
“You are obliged to do affordability assessments. There is a penalty if you give credit recklessly. If you have a look at it, there are about 20 million consumers with credit records, which is a fair chunk of people in this country. A fair percentage of our GDP is created by consumer spend, and a fair percentage of that is credit. So there is obviously an economic knock-on effect as well,” said Skuy.
There were further concerns over the rate that unsecured credit would increase by.
“You must understand that a lot of people have not banked and they can now take part in the formal economy which is positive.”
Sasi chairman, Prem Govender, was apprehensive that those who borrowed just won’t pay. This could potentially create an unsecured “credit bubble”.
“What criteria is being used? Is there no danger if they fail to pay?” It was encouraging, however, that some people were using unsecured credit to educate their children, she said.