If you definitely want to borrow some money and you are sure you can repay it, there are a number of important factors to consider.

Borrowing is not inherently bad, neither is unsecured lending. For thousands of South Africans, the latter is the only
option available to them. There is no denying that South Africa is an over-indebted society, but responsible lending can help address and resolve the situation.

To make unsecured lending work for society, credit providers must be held to high standards through regulation. Formal, legitimate lenders have strict rules to follow, such as conducting proper and comprehensive affordability checks to help prevent consumers from taking on debt that they cannot afford.

Importantly, when borrowing from a registered credit provider, consumers enjoy legal protection. Opportunities must therefore be created – through corporate financial wellness programmes, for instance – for vulnerable consumers to access formal lending instead of leaving them at the mercy of unprincipled informal lenders.

Formal credit providers furthermore take a longer-term view and manage risk – for the consumer’s protection and for their own benefit. For example, as a condition of issuing a loan, Bayport requires a customer to take out credit insurance. Should something unexpected happen, like a global pandemic, consumers have a safety net.

The value of this requirement is evident in the extent to which Bayport’s credit life insurance came to the rescue of thousands of our customers during the Covid-19 crisis. By the end of December 2020, we had paid out more than
R47 million in claims directly related to Covid-19’s impact on the economy, to more than 6 000 customers who could no longer afford their loan repayments due to retrenchment, short time, or compulsory leave. A further R40 million was paid out to about 1 000 customers who were retrenched; they did not specify Covid-19 in their claims, but we believe that the pandemic is probably to blame. Without credit insurance, these more than 7 000 customers and their
families would have been in terrible financial trouble, coping with the credit they could no longer afford.

The popular narrative holds that credit providers prefer their customers ignorant and gullible. It could not be further from the truth. Informed and financially savvy consumers make well considered credit decisions, seldom default, and
are the most profitable customers. Responsible credit providers like Bayport, therefore, invest time, effort, and resources into financial literacy.

When choosing a financial wellness partner for your workforce, be sure to establish its responsible lender credentials.

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