A research project submitted to Wits Business School in partial fulfilment of the requirements for the degree of Master of Management in Finance & Investment
February 2016 / South Africa has one of the highest income inequalities in the world. Although evidence suggests that access to secured credit has a positive impact on improving individuals’ earnings and reducing income inequality, secure credit has not been readily available to everyone in South Africa owing to past injustice of apartheid. This provided a business opportunity to credit providers who rolled out numerous unsecured lending financial products into the market. These are products historically target middle to low-income earners who don’t qualify for secured loans due to lack of collateral or good credit history. Small and Medium Enterprises (SMEs) also resort to these products when financial institutions don’t grant them secured loans because of their imbedded risky nature. Capitec Bank and African Bank are the biggest players in the South African unsecured lending market.
During the 2008 worldwide economic and financial crisis, many people lost their jobs in South Africa. The impact of the crisis continued to be felt way after the modest recovery achieved globally and domestically. As a result, most individuals could no longer afford mortgages and basic needs and services because of their compromised economic situation. Henceforth majority of individuals resorted to alternative income means for their survival. For most individual, unsecured lending was viewed as the quickest way of securing additional income to supplement their minimal or no income. This resulted in exponential countrywide growth in unsecured loans. As unsecured lending attract a higher interest rate than secured loans, other formal banking institutions have been attracted to this market resulting in compounded overall growth of the loan book.
This research paper aims to explore the unsecured lending landscape in South Africa with the intension of discovering how it has evolved over the years. It also explores whether unsecured lending has been a helping tool to the less fortunate through its impact on their subjective wellbeing.
The findings of the research indicated that individuals with unsecured loans have a lower subjective view of their personal wellbeing when compared to those without unsecured loans. However, unsecured loans improve individuals’ personal wellbeing through its direct effect on individuals’ health, educational status and income. / GR2018
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:wits/oai:wiredspace.wits.ac.za:10539/23849 |
| Date | January 2016 |
| Creators | Pakgadi, Motlanalo Kgodisho |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | Online resource (viii, 48, 40 leaves), application/pdf |
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