Protect honest micro lenders

Logan Govender - Weekend Post 17-19 May, 2002

It is time that the ethical and professional micro lenders in South Africa are afforded the recognition and protection they deserve. This is the opinion of the vice-president of the Consumer Union, Mrs. Ina Wilken.

South Africa is besieged with millions of illiterate citizens who possess little or no knowledge of the functioning of the general economy, never mind their own personal finance. Wit no security, no fixed assets, these same people who earn a pittance, find themselves unable to secure any form of credit through the normal banking channels.

Faced with lack of credit opportunities, these consumers find themselves with no other choice than to utilise the financial services offered by micro lenders. In their ignorance the consumer often falls prey to the unscrupulous lender.

Almost always never registered, the practices of these "unknown" entities (whose numbers are estimated to be in the thousands) make it imperative that a formal place be found for the ethical and professional lender, says Wilken.

She described the formal micro lending industry as "a breath of fresh air", within the South African economy.

Wilken, who is on the board of the Association of Micro Lenders, considers the interests of the consumer to be her greatest passion. She is adamant that the micro lending industry should, as the banks are, be operated on sound business principles, and also thereby receive appropriate recognition.

Wilken also feels strongly that all who are in any way associated with the industry have an enormous responsibility in rooting out lenders who are operating illegally.

"This responsibility can begin by informing the consumer of their right to make a informed decision when choosing the service of a micro lender.

Monopolise

Originally a private and transparent initiative, Wilken feels that the state should not monopolise the industry by over regulation and interferences.

"The aspect of financially illiterate consumers should be addressed and a level of financial discipline be instilled. This education process should be done at secondary school level that would create a new generation of informed borrowers who could make informed choices. It remains  the right of the consumer to be informed so that they (borrowers) make an informed decision.

"On the other hand, the consumer also has the responsibility to do his or her homework before choosing the services of a particular lender. Borrowers cannot always excuse themselves due to ignorance", she said.

Meanwhile the Banking Adjudicator, Advocate Neville Melville, said banks must do their bit to address consumer complaints.

In his annual report for 2001, Melville said that the workload of his office would decrease if banks investigated complaints from consumers timorously. He said lack of explanation and response, banks not accepting responsibility for errors and bad attitude, had been cited as common criticism.

However, like other professions there are those who go out of their way to please clients while others have a don't care attitude. Two thirds of banks polled in an independent survey were rated as good, very good or excellent.

Melville said that poor administrating had accounted for about 35% of the complaints while 18% of consumers had complained about fraud.

Banks were also negligent - 8,5% of the complaints had arisen owing to negligence. Of the complaints investigated by the adjudicator, 42% were resolved in favour of banks while 50% of the decisions were in favour of consumers.

ATM fraud was the worst in this country compared to others, he said.