Capitec, South Africa’s fastest growing low cost bank, rejected about 30 percent of the loan applications as budding customers could not afford more credit, CEO Riaan Stassen, told Moneyweb late on Wednesday.
“That is not a healthy sign at all. I am concerned over the high level of indebtedness of South Africans – that is a fact,” said Stassen in an interview with Moneyweb.
This is the reason Capitec was moving into a phase of ‘consolidation’ as the growth in SA’s credit market was sagging due to high levels of consumer indebtedness. It began tightening lending standards in the last two months of last year.
The move to consolidate is also informed by the company’s need to ensure the correctness of its lending models. This comes after a long period of nice growth in advances since 2007 and now the company is expecting far slower growth in the next two years.
“There is no reason for Capitec to take unnecessary risk,” Stassen told Moneyweb, noting also that the company was experiencing a “very strong” growth in the bank’s transactional revenue. Around 100 000 new customers have signed up with the bank annually.
According to South Africa’s National Credit Regulator (NCR), the total outstanding gross debtors book of consumer credit for the quarter ended September 2012 was R1.39 trillion ($155 billion), representing a quarter on quarter growth of 2.01 percent. The number of accounts increased by 0.28 percent for the quarter ended September 2012.
The rejection rate for applications was 53.60 percent for the quarter ended September 2012 when compared to 50.84 percent for the previous quarter.
The banks continued to dominate the total consumer credit market as at 30 September 2012. The banks` share of total credit granted was $10.3 billion (84.08 percent), retailers $558.6 million (4.55 percent), non-bank vehicle financiers $684 million (5.57 percent) and “Other credit providers” $712 million (5.80 percent).