DURBAN - Capitec Bank is offering improved credit affordability that provides personalised unsecured credit to eligible applicants at the same costs as secured loans.
This offer is a first of its kind and is set to revolutionise lending in South Africa.
The model uses big data, multiple regression models and new machine learning techniques to properly evaluate applicant's creditworthiness via a rigorous review of their unique financial behaviour.
This translates into better credit offers and lower interest rates that are tailored to a person's needs and credit profile.
The new metrics include traditional data points like disposable income and cash inflow as well as an applicants spending and saving behaviour, lifestyle choices and income streams. Applicants that have a lower risk and can bank smartly are eligible to qualify for unsecured loans of upto R250 000. The loan would be over a 4 year period with interest rates as low as 12,75% / prime +3.
Capitec Bank CEO, Gerrie Fourie said that they evolved their competitive credit offering to appeal to people who base that their credit choices on the total amount, monthly installment and now the lowest interest rates.
Unsecured can rejuvenate a stagnant economy
An econometric analysis was done to show the relationship between unsecured credit and the GDP in 2014.
The analysis was conducted by Dr Ilse Botha from the University of Johannesburg and Dr Roelof Botha from the Gordon Institute of Business Science.
According to Dr Roelof Botha the study showed that unsecured credit plays a critical role in reinvigorating a stagnated economy.
The model showed a positive relationship between the growth in unsecured credit and and the rate in which the the South African economy recovered from the 2008/2009 recession.
A lifeline to many asset poor South Africans
A 2016 study by the UCT Unilever Institute reported that unsecured credit is often the only way people can access capital to better their lives.
The study found that the majority of South Africans still form a part of the pre middle class and utilise unsecured loans as a means to rise above South Africa's extensive economic and education crisis.