African Bank 'to double' customer numbers

There is concern, however, about the behaviour of some credit providers whose affordability tests are said to be less stringent than those used by banks.

The CEO of African Bank, Leon Kirkinis, yesterday told a combined meeting of staff and customers in Midrand that it would not let up on its plans to expand its already dominant market share in unsecured lending.

It would, however, continue responsible lending practices and would have the "courage" to deny credit if felt customers could not afford the repayments.

"Responsible lending is the foundation of our business because, I think you agree with me, too much credit can destroy people's lives," he said.

The acting CEO of the National Credit Regulator, Nomsa Motshegare, at the weekend highlighted "undesirable market practices" of unnamed credit providers who denied high-risk customers secured credit but immediately sold them unsecured loans.

"Even though there is no overt contravention of the law in this practice, the ethics ... are questionable," Ms Motshegare said.

Executives at the top four banks insist they have not relaxed strict affordability tests and neither are they chasing market share at the risk of creating a nonperforming loan book.

The banks also denied claims by Higher Education and Training Minister Blade Nzimande that SA was sitting on a "time bomb" comparable to the international credit crisis, owing to the growth of unsecured loans.

The regulator's figures show that unsecured credit increased from R21,2bn last September to R26,5bn last December, representing a quarter-on-quarter increase of nearly 25%.

Credit facilities comprising mostly credit cards, store cards and bank overdrafts also went up more than 11,5% quarter on quarter from R14,9bn to R16,6bn.

Mr Kirkinis would not provide details of planned customer growth as the JSE-listed financial services group is in a closed period pending the release of its first-half results next month.

However, latest figures show that the group - which has more than 3,2-million customers - added 196000 new credit customers in the first quarter to December last year.

Mr Kirkinis said the meeting was part of a nationwide road show the bank had undertaken in the past three months to meet customers and staff and discuss the group's strategy.

African Bank is the first local financial institution to hold a combined staff and customer meeting, which Mr Kirkinis said was meant to obtain feedback and discuss the group's strategy.

Source: Business Day