The impact of the National Credit Act on micro lending sales in a bank in South Africa

Abstract

The South African Government moved aggressively to curb predatory lending, consumer abuses and outdated, piecemeal and ineffective legislation on consumer credit through the introduction of the National Credit (2005) and Regulations (2006). As a result the financial institutions and consumers are experiencing increasing pressure from the National Credit Act due to the strict lending regulations placed on the loans that it provides to its consumers or customers. The objective of this research is to determine the impact of the National Credit Act on the sales of a Micro Loan to a customer of a specific bank within South Africa. The research approach of data triangulation research approach was used, divided into two phases. Phase one consisted of data analysed from the specific bank in question and supports the framework and foundation for phase two which consisted of face-to-face semi-structured in-depth interviews with ten industry Micro Lending Industry Experts within South Africa. Content analysis and constant comparative analysis was used to identify the key patterns and themes that emerged The research found that the National Credit Act has had a significant impact on the Micro Lending Market with creating a more formal market and decreasing the informal market. The impact on the consumers repayment default on a micro loan was also significant and defaults decrease following the implementation. The general assumption that not enough time was given to the original goals set out by the Act to support the South African economy. Copyright