Money-lending, across the ages … Aristotle, 350bc: “Very much disliked is the practice of charging interest; and the dislike is fully justified … money intended to be a means of exchange … of all ways of getting wealth this is the most contrary to nature Cicero, 50 BC: “Gentlemen should not toil themselves with means of livelihood which provokes ill-will, such as collecting customs dues and money-lending” Bacon, 1597: “It is a vanity to conceive that there would be ordinary borrowing without profit; and it is impossible to conceive the number of inconveniencies that will ensue if borrowing be cramped … better to mitigate Usury by declaration, than to suffer it to rage by connivance”. Bentham, 1787: “The business of a moneylender … has no where nor at any time been a popular one. It is an oppression for a man to reclaim his own money: it is none to keep it from him”

Introduction to FEASibility presentation Gabriel Davel June 2009

3 NCA objectives & policy implications  Protection of incomes & social welfare benefits against lenders  Incentives for greater lending for housing & protection for lenders against reckless lenders  Incentives for greater SME lending  Monitoring of access & cost, including low income, rural, HDI, housing & SME  Promote competition in credit market  PROTECTION OF CONSUMERS

4 !! Pre-agreement Quote !! National Credit Act Scope NCA addresses the following issues:  Access to consumer credit;  Improve disclosure;  Prohibit unfair contractual practices  Regulate interest and fees;  Promote responsible credit granting, reckless lending rules & debt counselling;  Regulate credit bureaux & credit information  Enforcement & redress

5 Debt Counseling  77,000+ applications for debt review cumulatively, growing at 7000 pm could reach by end 2009  PDA distributions R66m paid in May’09, approx 8,000 consumers, (R352m cumulative, R600m annualised)

6 Huge progress & impact 920 debt counsellors trained & registered & independent PDA’s in place, fully functional On site visits to 306 Debt Counselors; Bursaries of R to 139 DC’s in priority areas; Created fund to cover cost for low income consumers Significant impact Dramatic change to manner in which credit providers approach debt stressed consumers Mechanism for consumers to restructure debt in current downturn But still significant challenges Credit provider obstruction, attitude, problems & NDMA – dysfunctional Debt Counsellors – some unprofessional, require on-going monitoring & support Magistrates Courts inefficient, processes unclear  Declaratory order + Regulations Debt Counseling - 2

7 Special Projects A.The National Credit Register Register of credit agreements, security & judgments  17m consumers, 36m agreements, covering consumers & SMEs Extensive engagement with industry & relevant govt departments Could add considerable value beyond core objective, e.g. SARB, home affairs Approaching Dept of Human Settlement, to co-ordinate data with HMDA needs Submissions finalised, hope to circulate tenders begin Aug (after approval) B. Employee wellbeing forum & awareness Ongoing workshops, regular media campaigns & coverage Forum = project to encourage / support employers to play greater role in managing debt stress for employees, also education & protection A.Impact of the financial crisis on SA credit market Monitor from own statistics Special research project

8 Research Projects 1.“Pricing and access to Consumer Credit” – market study by FEASibility 2.Analysis of indebtedness levels across different income groups ( BMR at Unisa ) 3.SME Access to Finance ( PERC, leading international research firm ) 4.Debt counselling: problems, obstacles ( Pta University ) 5.Impact of credit crisis on SA credit market (FEASibility)

9 NCR’s Statistical Reports Collect & disseminate information from credit bureaus & credit providers (sections 13, 16 et al) For the purpose of (a) monitoring trends by the NCR, other public entities & government, and (b) information for the credit industry to assess trends & risks Focus on dis-aggregation, to get better understanding of profile of credit granted, profile of consumers, access to different form of finance … & changes over time

10 Profile of access to credit Different products to different income groups – Dec’08 MortgagesR734bn, consisting of 1.8 million accounts 91% to > R15k income group Other agreements R229bn, consisting of 5.6 million accounts 67% to >R15k income group FacilitiesR137bn, consisting of 23.4m accounts 42% to >R15k income group UnsecuredR47bn, consisting of 5.1m accounts, 17% to >R15k income group Short term- to finalise upon processing of small lender returns - 2% to >R15k income group Position as at December 2008

11 Credit Bureau Statistics

12 Impact of financial crisis on SA credit market 1.Consumer applications fairly static, possible signs of slight recovery in some sectors? 2.Consumer stress levels continuing to increase … but gradual rather than ‘exponential’ 3.Bank rejection rates continuing to increase, even more so for big-4 4.Continuing decline in disbursements, but strong recovery in retail (clothing & furniture) credit extension in Q4’08 5.Housing market under pressure, but only now going negative –nominal & inflation adjusted numbers confuse picture, also differences in samples! 6.Bank rejection rates and increased credit criteria may be creating risks, e.g. (a) on housing values (given increasing repossessions, (b) on business (and employment), and (c) on consumption & growth. But there may be signs in increasing approval rate in Q1’09.

13 Challenge to financial sector  The dysfunctionalities in the SA credit marker is well-documented, ranging from access that is skewed and uneven, excessive consumption lending, in compared to housing or SME lending, very high cost in many categories …  … debt stress driven by aggressive selling and mis-selling by the credit industry!  The NCA create a framework for these challenges to be addressed, for credit market to operate in a fair and transparent manner … we still have some way to go in realizing the objectives of the NCA, particularly in debt counselling!

14 Thank You !