This
service is only available to South African Citizens
with a Green
Bar-coded Identity document; who are over the age of 21 years but
under the age of 65 years; have
been employed for at least six months and have a bank account into which
their salary is paid.
Legalities,
regulations and Micro Financiers
Micro
financiers
act in terms of legal provisions that have been put in place by the
authorities, in terms of the Usury Act or Regulations. All micro
financiers have to be registered with the Micro Finance Regulatory
Council (NCR) and be able to prove their membership to the public. By
registration with the NCR, a Micro financier does not automatically become
ethical end therefore, as a form of self-regulation; MFSA members are
subject to a stringent code of ethical behaviour codes that also
include proving membership to the public.
Professional micro financiers, consequently, are registered, act in
terms of the law and maintain high professional, ethical and moral
standards in the course of conducting their business.
Consumers,
Micro Financiers and a debt spiral
Consumers
are selected and assisted in only borrowing such amounts to ensure
affordable repayments. Clients are assisted further in elementary
financial planning and basic budgeting, as explained in the MFSA's
community education publication: "Personal Money Management".
Specific attention is given to the aspect of granting loans that the
client is capable of repaying. If a Micro financier intends to
continue the business cycle with his clients and repeat business, it is
not in his interest to over lend. (By doing so he would only have a market
for his loans for a few months, where after he would have to shut down).
Micro
Financiers and “Loan Sharks”
There
is a clear distinction between formal micro financiers who observe
strict business ethics and informal lenders who choose to remain faceless (no
office or fixed address etc.) The latter often show no mercy in their
dealings with their clients. It is this kind of operator that is the
essence of "Loan Sharking".
It
is both illegal, and unnecessary, for the Micro financier to retain
clients’ Bank Cards/Pin numbers or ID documents and this is something
that the MFSA strongly disapproves of.
Micro
Financiers and excessive interest rates.
The
cost of credit charged by micro financiers is referred to incorrectly
as being the interest rate. However, it represents the total finance
costs per micro loan/personal loan, charged by micro financiers,
inclusive of components such as administration costs, management of the
account and risk. This mark-up can, therefore, not be equated with the
interest rate charged by a bank, as this would be tantamount to comparing
apples with pears. Micro financiers may not charge any other costs e.g.
administrative costs separately. The mark-up,
therefore, is all the client pays and there are no hidden costs.
Risks
involved in Micro Financing.
The
main reason why the interest rate portion, only, of micro financiers'
charges is higher than that of the banks is because micro financiers take
a far greater risk than banks do. Banks are invariably not prepared to
help any client who does not have security for a micro loan. Micro
financiers lend money without any security being offered by the client.
The administrative costs related to lending transactions, are relatively
higher for smaller unsecured loans. Several small, unsecured loans are
necessary before a Micro financier is able to generate income equal to
that which a bank is able to generate by means of one big loan over a
term. Micro financiers are entitled to cover their costs and to make a
reasonable profit in line with the risks to which they are exposed.
Let us
assist you to get hold of that much needed cash.
