PODCAST | New study shows short-term credit extensions are down 20%

The drop in short-term credit extension is the focus in this edition of the Business Day Spotlight.

Our host Mudiwa Gavaza is joined by Johan Gellatly, MD of Altron Fintech, and Keith Lockwood, an independent economic consultant and faculty member at business school GIBS.

Altron recently launched a new index, called the Altron Fintech Short-term Credit Impact (Afsci), which was created in partnership with Lockwood.

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The index is meant to provide assistance to “credit providers in the short-term credit market in their assessment of risk and credit extension, and in building a deeper understanding of the role that this form of credit plays in the SA economy and society”.

The key finding of the study is that short-term credit extension is was down 20%.   

Lockwood says the contraction of net credit extension generates negative multiplier effects throughout the economy. He attributes part of this result to the drop in total employment during the pandemic, down to 1.4-million jobs, as well as the decline in average real incomes in SA.

Gellatly, whose unit provides software solutions for micro-lending companies in SA, says while short-term credit makes up a very small share of total consumer credit, it is an important market as it provides first-time access to credit to many people.

Topics of discussion include: how the Afsci index was created; Altron’s reasons for creating an index; key findings from the first index results; ways in which the data can be applied in business and economics; the importance of micro lending in SA; and a comparison of Altron’s other index released in August.

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• Business Day Spotlight is a MultimediaLIVE production.