Cape Town – South Africans were the biggest borrowers in the world in 2014, according to a report issued by the World Bank.
And they appear to be borrowing mostly from friends and family, private micro-lenders and to a far lesser extent from financial institutions.
This report from the World Bank, known as the Global Findex database, provides in-depth data on how people use financial services worldwide, how they save, borrow, manage risk and make payments. Interviews were conducted with 150 000 adults over the age of 15 from 140 different economies.
So how does South Africa compare to the rest of the world when it comes to borrowing money in an emergency? And who do South Africans borrow from? And what is seen as an emergency in South Africa?
Worldwide, 40% of people took out a loan in 2013 – 2014, but 86% of South Africans did so. The only countries that came near South Africa in the borrowing stakes were Zimbabwe (62%), Kenya (79%) Botswana (69%), Niger (71%) and Iran (80%).
At least 30% of adults in South Africa said they would not be able to raise funds in a crisis if they to do so within the next month.
Where do South Africans borrow?
Although 70% of South Africans have an account at a financial institution, only 12% of South Africans borrowed from a formal financial institution in 2014, whereas 71.2% borrowed from family and friends, and 18.4% borrowed from a private informal lender. It must be remembered that some of these people borrowed from more than one type of lender. But the shocking statistic is that 86% of South Africans borrowed money, making them the top borrowers in the world.
And only 9.2% of these borrowers bought houses with the money, while 7.5% borrowed for a farm or business, 18% for school fees or education, and 18% to pay for healthcare costs.
It appears that South Africans are borrowing money to cover day-to-day costs.
“In South Africa, the cost of living is very high in relation to income,” says Neil Roets, CEO of Debt Rescue.
“On the average income of for example a police officer, it would be very difficult to meet the basic household needs of a family, without having a second income. And many workers in South Africa earn far less than a police officer does.”
He mentions that there are three types of debt people make in South Africa: one to maintain a certain basic lifestyle, one to live a life of luxury, and one for the purposes of pure survival.
More facts on South Africans and their money habits
Drawing money from an ATM is how 81% of South Africans accessed their money in 2014. Fifty-five percent used a debit card to make purchases, and 10% made digital payments using a credit card.
Sub-Saharan Africa leads the world in the number of mobile money accounts, with 12% of the population having one, whereas worldwide this percentage is just 2%.
Worldwide, 62% of adults have an account at a bank or a comparable financial institution, and between 2011 and 2014 this number increased by 700 million adults worldwide. The so-called ‘unbanked’ – people without any bank account – now measure 2 billion people worldwide. Thirty percent of the SA population do not yet have accounts at a financial institution.
References: The World Bank