Renee Bonorchis

AFRICAN Bank Investments Limited (Abil) was assessing who it lent to more carefully because of an oversupply of credit to its target market, the chief executive of South Africa’s biggest provider of unsecured loans has said.

The value of consumer loans not backed by assets surged 39 percent in the 12 months to September last year to R140 billion, data from the National Credit Regulator show.

“We pulled back in August last year when we saw an oversupply of credit,” Abil chief executive Leon Kirkinis said on Friday. “There has been a herd mentality and the growth in credit has been supply-side driven.”

Abil’s nearest rival, Capitec Bank, said this month that a third of people applying for credit were too over-committed to be considered for loans.

Fellow microfinancier Bayport cut the number of new loans by 29 percent in November from the month before.

“Eighteen months ago we would approve 80 out of 100 loans and then in 2012 it was 77 out of 100 and by the end of last year it was 68 out of 100,” Kirkinis said. The bank was prepared to tighten its lending criteria again as consumer indebtedness was rising, he said.

Abil was applying more stringent criteria to civil servants and mineworkers because too much credit was being afforded to employees in those industries without adequate assessments being done on their ability to repay loans, he added.

“The industry is slowing down and that’s a good thing,” he said. “People realised it was going too far. There was an exuberance.”

Still, there were many people in South Africa who could not access secured credit and that provided room for growth for Abil, Kirkinis said. The company was not considering expanding outside the country.

The bank was seeking to provide funeral policies and to extend credit to entrepreneurs.

Abil boosted its gross advances by 33 percent to R53bn in the year to September 2012.

The stock has lost 17 percent over the past year on the JSE, the second-worst performance on the 52-member FTSE/JSE Africa financials index.

The stock fell 1.23 percent to R30.58 yesterday, for a market value of R25.5bn. – Bloomberg