Capitec, which grew into SA’s biggest bank by customer numbers by focusing on those traditionally excluded by commercial lenders, says it has been actively reducing its exposure to low-income earners in anticipation of the recently-approved debt relief legislation.

In a statement yesterday that Business Day says may be seen as confirmation of the unintended and harmful effect of a new credit-relief law signed by President Cyril Ramaphosa last week, the bank said people earning less than R7 500 a month now accounted for less than 5% of its loan book.

Capitec, which was started as a microlender in the late 1990s and listed on the JSE in 2002, has been lauded for improving financial inclusion in SA by lending to the entry-level income segment at a time when more established rivals were reluctant to extend credit to poorer South Africans.

‘During the two years leading to the amendment, Capitec Bank planned and managed our exposure to the consumer market earning less than R7 500 per month, being well aware of the regulatory development,’ said CEO Gerrie Fourie.

Ramaphosa approved the National Credit Amendment Bill last week, which proposes among other things, expunging debt for over-extended consumers under certain circumstances.

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Efficient Group chief economist Dawie Roodt has warned the new Act could have dire unintended consequences, says a Fin24 report.

‘We’re on the threshold of seeing the expropriation of land without compensation. Now the ANC government is fiddling with the financial system by condoning the write-off of anywhere between R13bn and R20bn (according to the National Treasury) of debt belonging to banks and other financial institutions. These loans are as much property as anything else and is supposedly protected by article 25 of the Constitution.

What kind of message is this sending to the ratings agencies such as Moody’s and Standard & Poor’s?

As the Constitution stands at the moment, there is a strong possibility that the law is unconstitutional,’ Roodt said.

Debt Rescue CEO Neil Roets welcomed the basic principle of providing debt relief for the poor. However, he suggested that the government should be looking at a more inclusive manner in which relief could be provided.

‘The process of debt counselling has been working superbly well for many years and has assisted many thousands of indebted consumers to pay off their debts by paying smaller installments over a longer period of time through mutual agreement with lenders.’

Roets said it would be infinitely better to use the existing system of debt counselling rather than for the National Credit Regulator to set up another system from scratch.

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