Exclusion does not mean protection

OPINION EDITORIAL

Exclusion does not mean protection

By Leonie van Pletzen, CEO of CASA

South Africa’s National Credit Act was designed to protect vulnerable borrowers from exploitation, over-indebtedness and opaque lending practices. That objective remains as important today as it was at the Act’s inception.

But in one critical respect, our regulatory framework is no longer aligned with economic reality and the consequences are increasingly visible at the margins of the formal credit market.

The pricing architecture governing short-term credit has not been meaningfully reviewed since 2015. During that time, inflation has materially increased operating costs, compliance obligations have expanded, funding costs have risen, and collection processes have become more expensive following regulatory reforms such as DebiCheck.

Yet the caps on interest rates and fees have remained largely static in nominal terms.

When regulated pricing structures fail to evolve alongside economic conditions, access does not remain neutral. It contracts.

Lenders respond rationally to cost pressures by tightening risk appetite, particularly toward higher-risk and thin-file borrowers. Marginal applicants are declined. Exposure to new-to-credit consumers is reduced. Smaller branch-based lenders operating in rural or peri-urban communities face mounting sustainability pressure.

The impact is not theoretical. Real credit extension in certain unsecured segments remains below historical levels. Entry into the formal credit market for thin-file borrowers has declined significantly in recent years.

And when regulated access narrows, demand does not disappear.

It shifts.

Independent demand-side research indicates that a substantial proportion of declined borrowers subsequently turn to unregistered lenders. These informal markets operate outside the protections embedded in the National Credit Act. They do not conduct regulated affordability assessments. They do not report repayment behaviour to credit bureaus. They often impose materially higher effective costs of credit and provide no enforceable recourse for consumers.

In attempting to protect borrowers from high pricing within a regulated framework, we risk exposing them to far greater harm outside it.

This is not a call for deregulation. Nor is it an argument for weakening affordability standards. Consumer protection must remain central to South Africa’s credit framework.

But exclusion is not protection.

A regulated market that cannot sustainably serve demand across income segments will inevitably ration access. That rationing disproportionately affects young entrants to the credit market, informal sector workers and households managing income volatility without savings buffers, precisely the consumers financial inclusion policy seeks to integrate.

Short-term credit plays an important role in smoothing income shocks, supporting microenterprise activity and enabling participation in the formal financial system. When regulated supply tightens, informal markets expand, but they do not contribute to credit bureau participation, financial transparency or long-term economic mobility.

The debate around rates and fees is often framed narrowly as affordability versus profitability. That framing misses a more fundamental policy question: does the current pricing architecture enable sustainable provision of regulated credit under modern economic conditions?

A structured, evidence-based review of rates and fees under the National Credit Act presents an opportunity to restore alignment. Inflation-linked adjustment mechanisms, simplified pricing structures and periodic review cycles would prevent future stagnation while preserving the Act’s consumer safeguards.

CASA has been formally engaging  with the DTIC and the National Credit Regulator to initiate such an evidence-based review of rates and fees. I believe that a collaborative approach is vital for us to find a sustainable solution, and we appreciate and commend their willingness to openly and constructively engage with us on this matter.

The objective should not be deregulation. It should be recalibration.

Consumer protection and access to credit are not competing goals; they are interdependent. If regulated credit becomes economically unviable to provide at the margins, informal markets will continue to grow and the very consumers the Act seeks to protect will bear the cost.

South Africa’s commitment to financial inclusion requires ensuring that regulated credit remains both responsible and accessible.

Consumer protection should not translate into consumer exclusion.

Modernising the pricing framework is not about increasing margins. It is about preventing the emergence of a two-tier credit system in which the most vulnerable borrowers are left outside the regulated economy.

Financial inclusion depends on getting that balance right.

Ends

About Leonie van Pletzen

Leonie van Pletzen is the Chief Executive Officer of the Credit Association of South Africa (CASA). With 15 years of experience in the industry, Leonie is recognised as a passionate advocate for ethical lending, financial inclusion, and regulatory reform. She brings a wealth of expertise in industry advocacy, corporate governance, stakeholder engagement, and sustainable development.

Leonie has played a key role in shaping policy dialogue between government, regulators, and the private sector, and is an active contributor on various national committees, including the National Credit Regulator’s Credit Industry Forum and the Banking Sector Education and Training Authority. Her leadership is defined by a commitment to protecting vulnerable consumers while ensuring the long-term sustainability of responsible credit provision in South Africa.

About the Credit Association of South Africa (CASA)

CASA is South Africa’s leading association representing responsible and professional non-bank credit providers. CASA exists to enable credit providers to thrive and to build a sustainable credit industry that supports economic growth and financial inclusion across South Africa.

CASA brings together ethical and professional credit providers to build a fair, sustainable, and inclusive credit industry, reflecting a broader mandate and renewed purpose to serve the entire credit sector.

It is a member-based, non-profit association governed by an Annual General Meeting, an elected Board, and specialised Board Committees. CASA is registered as a Section 21 Company (1996/001116/08), with MVB Auditors as its auditors and Nedbank as its official banking partner.

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The Friday Street Club

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Email: claire@thefridaystreetclub.co.za