Micro lending in South Africa: 'If we can't lend, we can't grow'

Players in the micro lending space in South Africa say they are struggling to sustain their businesses.

Certified financial planner Paul Roelofse says it's become much less viable for them to continue operating, mainly due to the limits placed on them by the National Credit Act.

Another hurdle they often face is a large portion of their clients simply defaulting on their payments.

"They'd rather not take on the business, because it's an unsecured loan – unlike banks which can secure your house, they secure your car... if you default, they'll take that back from you very quickly. But in the micro lending space, there's no security."

Unfortunately, the only alternatives for many desperate people then are loan sharks, which are even more expensive in terms of the interest they charge.

Roelofse says he believes, however, that there is potential for compromise.

"I think there is a space between micro lending and banks, where we can find a neutral ground... banks can charge you a lower rate of interest because they've got your property as security – micro lenders can't, so they've got to charge you higher.

"The lending space that micro lenders do support is very very important for our economy... we're looking for growth – and if we can't lend, we can't grow."

To listen to Roelofse in conversation with Kgomotso Modise in for 702's John Perlman, click the audio below: