In South Africa today, a struggling economy combined with massively high unemployment means there are many citizens who are unable to qualify for short term loans from NCR registered and compliant lenders. However, many lenders who fail to qualify – due to a lack of credit history – end up accessing a loan through NCR unregistered lenders instead.
While there are many issues with such providers, not the least of which is the rates of interest they charge, the biggest one remains the simple fact that because they are unregistered, clients that do pay them back timeously and in full are unable to build a reputable credit history profile.
Pierre Bezuidenhout, General Manager at Delter, a division of Altron, explains that recent market research indicates there are around 40 000 NCR unregistered credit providers in South Africa. He says if they can be persuaded to become NCR registered, clients using their services will be able to build their credit history and ultimately gain exposure to the formal credit market.
“This is a two-pronged issue, as we know that, firstly, clients would like to improve their credit history records in a way that gives them access to the formal credit market, but at the same time, these unregistered lenders also want the opportunity to grow their businesses, increase their revenue, open new branches or purchase better technology. Of course, they suffer the same challenge as their clients, in that to achieve this, they first need to be an NCR registered micro-lender with proven financial records,” he says.
“Bearing in mind that that these unregistered providers tend to have a manual approach to record keeping and administration – think the traditional little black book filled with notes and details of individual customers – ensuring that these records are comprehensive and accurate are a near impossibility. What is needed instead is a technology-focused administration solution to make keeping track of their administration tasks that much easier.”
There are cloud-based systems available, he continues, that provide accurate reporting and much more effective record keeping. These solutions are designed to be entry level, with no bells and whistles, to keep costs low. Nonetheless, they allow the user to do tasks like identify new customers, create loans that comply with the regulations of the National Credit Regulator (NCR) and even afford them access to legal contractual documentation. Bezuidenhout suggests these solutions are essentially tailored versions of the high-end corporate toolsets used by enterprises.
“Implementing such a system should not be prohibitively expensive and will serve as an enabler to assist these lenders to become registered, putting them in a position to grow their business. The beauty of such an approach is that it will enable them to ensure that not only is their business reputable, they will be building a tangible asset to pass on to the next generation.”
He explains that these solutions are designed to work off a tablet, making them both easy to use and mobile. They are, he says, designed to offer basic loan origination functionality and automated reporting on issues like who has not paid and how much credit has been granted in any given month. It also affords them the opportunity to institute legal action for non-payment, which is a far better approach than using threats or coercion.
“By introducing these micro-lenders to the technology age and exposing them to solutions that will help them to understand exactly what is happening in their organisations, they will be well-positioned to make better, faster decisions, while also mitigating both their and their customers’ risk. There is little doubt that the time is right for these lenders to embrace technology, as it will ultimately make their lives simpler and more efficient, while doing the same for their customers. This really is the future of micro-lending,” he concludes.
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