Financial experts say intensified consumer education would end an emerging problematic trend in which people are taking loans just to put food on the table. Results of a study on consumer buying patterns were released at the Joint Credit and Over-Indebtedness summit held in Midrand, yesterday.
The summit also revealed that consumers were taking loans to meet their basic needs rather than buying cars or renovating their homes.
These findings come ahead of the Medium-Term Policy Budge Statement to be presented by the Finance Minister Pravin Gordan this afternoon. The Minister will present the budget statement amid the current global financial crisis.
In these hard-pressed economic times people are borrowing to pay for food, transport and electricity
Dr Sabina Strassburg from FinMark Trust says: They don’t borrow money for investment purposes, they borrow for basic necessities which is highly concerning because obviously if you are not able to pay this month, you probably wont be able to make it next month without taking out another loan or taking money from other people”.
The National credit act was intended to protect consumers and to ensure responsible credit lending. But there are unintended consequences
Profit taking by debt counsellors is another unintended consequence
Neil Lightfoot from Genesis Analysis says: “The fact that they are for profit and are looking to profiteer off the unfortunate circumstance of the debt distressed market in my view is not necessarily appropriate”.
The banking sector focusing on the lower end of the market is identified as one of the reasons driving the surge in unsecured lending.
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