Despite the call by economic experts for South Africans to learn how to spend wisely especially in the present economic difficulty, South Africans have been named the biggest borrowers in the world with about 86% of the country’s citizens being in dept and 10.3 million people battling to meet their monthly debt repayments.
Being a borrowing junkie isn’t just a habit to easily over look, especially when it turns to an addiction. South Africans have been described as people who generally have low levels of financial literacy and high levels of indebtedness with a lager percentage not knowing what and how exactly their monies were spent.
This according to New Age has generated a blame game between lenders and borrowers take responsibility for their borrowing and lending decisions.
Addressing this issue, the Chief executive of Fincheck – an online financial and loan comparison website for South Africa- Michael Bowren said both lenders and borrowers – consumers and financial service providers – need to take full responsibility for the products they acquire and sell.
Apparently, the decision not to control borrowing and lending habbit in south Africa has fuelled citizens’ escalating spiral into debt.
“Borrowers and lenders must both be responsible, proactive and honest. The onus is on the financial institution to provide accurate information and to help the consumer understand the terms and conditions of the loan, but it is also up to prospective borrowers to ask and demand answers to all the questions that they have.” Bowren said
After comparing the costs of 26 financial products from 106 accredited financial institutions, Fincheck’s Bowren said “despite offering 26 financial products on our site, by far the most interest from consumers is the loans category. We compare the full set of loan types including personal, payday, student, home, vehicle finance, peer-to-peer lending, secured and bursaries. Debt consolidation products are also compared.”
Elabourating further on the borrrowing habbit of south Africans, Micro Finance South Africa chief executive Hennie Ferreira said many south Africans are often quick to take out loans and most times more than once and then blame financial institutions when they cannot repay them.
Ferreira however blamed all financial service providers for not giving prospective loan customers the information that they need in a way that they can understand.
“South Africans must ask difficult questions and must insist on answers that they understand. The reputable lenders will answer and the dubious agencies will avoid such difficult questions”says Ferreira, adding that many South Africans are unfortunately taking out loans to pay back other loans, a spiral of debt that only gets worse.
“This is why we want to educate consumers about their money, how to spend it, how to borrow it, how to pay it back and how to save it, in the most cost-effective and sustainable way.
“South Africans generally have low levels of financial literacy and high levels of indebtedness. There are people who get paid on the 25th of the month and by the 1st of the next month they are already ‘in the red’. Loan sharks and Ponzi schemes make borrowing seem like an easy, hassle-free quick-fix, but the opposite is true.
“Consumers must make sure they are borrowing from accredited and legitimate financial service providers.”
Meanwhile, a report from statisticSA proves that a larger amount of south African monies go to food and more liquor.
Classifying south Africans under stress eaters- a group inclined to frequent the kitchen and hog the fridge when faced with tough times, the report showed how sales grew by 3.4% in the first quarter of 2016 compared with the same period last year.
So, while unemployment rose, with 355 000 jobs shed in the first quarter of the year, and as wage increases fell below inflation, south Africans still found ways to spend.
But Ferreira who is concerned by the growing spending habits of people advise that people should get credit reports, query their concerns with the credit ombudsman, take charge of their financial journey and aim to move from being a borrower to a saver.
He said Credit is vital to keep our economy turning and it is an anchor for economic growth and development. But responsibility all round is the baseline.