JANUARY WOES: FSRA WARNS SHYLOCKS ON 40% INTEREST

MBABANE – It is that time of the year where desperation for money, particularly for school fees, kicks in and some micro-lenders, popularly known as shylocks, are charging as high as 40 per cent interest.

Financial Services Regulatory Authority (FSRA) Head of Stakeholder and Consumer Affairs Mbuso Gamedze, said they were aware of unregistered micro-lenders who were taking advantage of desperate citizens, particularly at this time of the year and they were discouraging such.

Loans

Gamedze said issuance of loans was guided by the Consumer Credit Act of 2016, but what remained a vacuum were the regulations to operationalise the Act which should come with specifications, especially on the limit of interest the micro-lenders should charge. “We discourage the micro-lenders charging high interests and we can state that regulations to specify on standard interest rates on loans are at an advanced stage,” he said.

One of the micro-lenders, who spoke on condition of anonymity, stated that they were in business and were always taking advantage of business opportunities that would generate income for them.  He said being a micro-lender entailed looking at financial gaps and take advantage of those to expand their business and earnings.

“We all know that in January, a great percentage of people are going through financial difficulties, mostly caused by the festive hype and reckless spending and we take advantage of that. We are in business after all and business is all about opportunities,” he said. Section 38 (1) (a)(b)(c)(d) of the Consumer Credit Act states that, a credit provider shall not charge an amount to, or impose a monetary liability on, the consumer in respect of a credit fee or charge prohibited by this Act, an amount of a fee or charge exceeding the amount that may be charged consistent with this Act, an interest charge under a credit agreement exceeding the amount that may be charged consistent with this Act or any fee, charge, commission, expense or other amount payable by the credit provider to any third party in respect of a credit agreement, except as contemplated in this Act.

Section 41 (1) states that the interest rate applicable to an amount in default or an overdue payment under a credit agreement may not exceed the highest interest rate applicable to any part of the principal debt under that agreement. Economist and University of Eswatini (UNESWA) Lecturer Sanele Sibiya, said people should avoid relying on shylocks for loans, especially those who were not registered because they were the ones charging ridiculous interests on loans.

He said if there was a dire need to get a loan from a shylock, it should be one who was fully registered and doing business according to the required standards. He highlighted that the only time one should go to a shylock should be for  emergencies like death, because that was unplanned for. Sibiya said for such things as school fees, people should have a financial plan for that because it was a financial obligation that existed from the beginning of the year to the end, hence should not translate to financial distress when the time came for one to pay.

Culture

“People should adopt the culture of saving and having financial plans, especially for something that they know, for a prolonged period, will need money. If it calls for going to a shylock, again one should have a payment plan in place that will ensure that the shylock’s debt is paid in a short period and after settling the debt, they should avoid going back to the shylock for another loan. It speaks to avoiding unnecessary loans, for entertainment at times, because those are the decisions that land one into financial troubles,” he said.

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