MicroFinance South Africa (MFSA), the national body representing over 1 800 registered credit providers, has welcomed the decision by Minister of Trade, Industry and Competition, Mr Parks Tau, to withdraw the Draft National Credit Act Amendment Regulations.
MFSA believes the move underscores the importance of meaningful consultation in shaping regulations that protect consumers while ensuring fair and inclusive access to credit.
However, MFSA cautions that the withdrawal should not slow progress on urgently needed reforms to credit pricing. The association warns that outdated and inadequate rate and fee structures, unchanged since 2015, are putting smaller and developmental credit providers under increasing strain.
“Many of these providers operate in rural and township economies, serve MSMEs, and reach first-time borrowers who would otherwise be excluded from the financial system,” says MFSA CEO, Leonie van Pletzen.
“Our sector fills a gap that banks often won’t,” she explains. “Without an inflation-linked review of rates and fees, providers serving the most vulnerable South Africans will continue to close their doors, cutting off critical lifelines of credit.”
Van Pletzen highlights that:
- Nearly 13 million credit applications per quarter are rejected under current pricing constraints;
- Short-term unsecured credit is used for key developmental purposes. MFSA’s research shows 18% goes to education, 14% to micro-enterprise, and 9% to housing;
- Static caps on interest rates and fees erode sustainability for providers who are already tightly regulated under the National Credit Act.
The association is calling on the Minister and the DTIC to urgently convene a stakeholder engagement process to review rates and fees. MFSA argues that a balanced, evidence-based framework is essential to:
- Keep credit affordable for consumers;
- Maintain the financial viability of legal credit providers;
- Prevent consumers from turning to unregulated or illegal lenders.
“MFSA stands ready to collaborate with government and regulators to craft a modernised, inflation-linked pricing framework that protects consumers, while safeguarding sustainable credit provision,” concludes van Pletzen.
