Comercial o de tercera

In South Africa, the total credit to the economy increased since 1994. Between 1994 and 2001, domestic credit to the private sector increased from 111% to 138% of GDP, GDP (SARB). This reflects that the banking system has increased credit access and indicates new entrants to the banking sector. In addition, bank deposits rose from 14% in 1993 to 90% in 2012 (SARB). This indicates that the financial size and depth as measured by the bank deposits have been stable.

The number of commercial banks branches per 100 000 adults increased from 2004 to 2006 (SARB). The same applies to the number of commercial bank branches per 1000 square metres. On average, the number of commercial bank branches per 100 000 adults increased from 4.74 in 2004 to 10.24 in 2012 and the number of commercial bank branches per 1000 square metres increased from 1.26 in 2004 to 3.05 in 2012 (SARB). The assets of the banking institutions as a percentage of GDP increased steadily from 22% in 1994 to 129% in 2012 (SARB). This indicates that the breadth of the financial sector increased significantly.

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South African market (NCR). However, in 2009, there was a turning point. The credit granted started to grow and in 2012 went back to the level of the end of Quarter 4 in 2007 (NCR). The size of the credit market at the end of 2011 was R1.3 trillion (NCR). Banks are the prominent credit providers. Nevertheless, while the South African banking sector is one of the best in the world, the population remains significantly under-banked. The rejection rate of small firms that apply for bank-sponsored schemes is high and even registered micro enterprises are least likely to have access to credit.

Underhill Corporate Solutions conducted a study for the NCR in 2011 to examine if there is SME financing gap in South Africa. A “financing gap” refers to a proportion of economically significant SMEs that cannot obtain credit. They estimated the total financing gap at around 45-48% of all SMEs in South Africa.

In aggregate, when looking at all the credit provided to customers, the total number of credit agreements entered into was 4.51 million for the quarter ended June 2016 based on the NCR Consumer Credit Market Quarterly Report5_{. Out of the 4.51 million, banks} accounted for 77.45% of the total value of credit granted. This is indicated in Figure 1. The non-bank vehicle financiers extended 9.34%, retailers 2.74%, and other credit providers 10.47% of the 4.51 million.

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Figure 1:Credit granted per industry as at June 2016

Source: NCR 2016

The number of application to these industries was 9.9 million, of which 5.3 million or 54.44% was rejected as indicated in Figure 2, and only 46% was accepted. This indicates that the credit rejection level is very high. The number of applications that are rejected is above the number of accepted applications.

Figure 2: Number of application and rejection as at June 2016

Source: NCR 2016 77% 9% 3% 11% Banks Non-bank vehicle financiers Retailers

Other credit providers

46% 54% Number of application accepted Number of application rejected

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Figure 3 indicates the composition of the credit provided. Most of the credit was secured credit (33.19%), followed by mortgages agreement (33.11%) and credit facilities (11.13%). These types of credit are defined as follow:

Credit facilities - An agreement that meets all the criteria as set out in section 8 (3) of the NCA. The values (rand value and number of accounts) reported for “credit facility” includes both new credit facilities and limit increases for existing credit facility agreements. These values represent the potential exposure of the credit providers and not the actual usage/consumption by consumers. This does not apply to the gross value of the debtors book values where actual credit usage by consumers is reported.

Mortgage agreements - An agreement that is secured by a pledge of immovable property. Secured credit transactions- Credit transactions that do not fall within the other named categories in the NCA. This category includes pension-backed loans, insurance-backed loans, retail furniture accounts and motor vehicle accounts.

Short-term credit transactions - An agreement that meets all the criteria as set out in section 39 (2) of the National Credit Regulations. This includes amounts not exceeding R8 000 and repayable within 6 months.

Unsecured credit transactions - An agreement that meets all the criteria as set out in section 39 (3) of the National Credit Regulations, where the loan or credit is not secured by any pledge or personal security.

Developmental credit transactions - Developmental credit agreement means a credit agreement that satisfies the criteria set out in Section 10; This includes educational loan; small business; the acquisition, rehabilitation, building or expansion of low-income housing; or any other purpose in terms of subsection (2) (a).

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Figure 3: Credit granted type as at June 2016

Source: NCA 2016

Moreover, Driver, Wood, Segal, and Herrington (2001) reported that financial institutions in South Africa mainly deal with large corporations that undertake large projects. Driver et al. (2001) further claim that banks do not support enterprises through a process and would rather lend more to one customer than lend insignificant amounts to many customers because it is costly and involves too much paperwork for the banks.