Township loan sharks (‘mashonisas’) offer quick and easy access to small, short-term loans, despite not having any legal protection. They are illegal and unregulated. Karen Sandison/African News Agency (ANA)

Short-term, high-interest loans have been part of the credit landscape for many years. But not all microlenders are regulated - many are flying low under the radar. Which leaves desperate consumers, who turn to loan sharks, exposed and vulnerable to abuse.
In May, microlender Wonga issued a report that found unregistered lenders or “loan sharks” to be more widespread than expected, with an estimated “40000 operating in South Africa, at a ratio of 1:100 for every household in informal settlements”.

The average value of a loan ranged from R500 to R1000, with interest ranging from 30% to 50%.

These “mashonisas” (township loan sharks), says Wonga, offer “quick and easy access to small, short-term loans, despite not having any legal protection”.

Mashonisas are illegal and unregulated, and operate without compliance with the National Credit Act (NCA). Yet they serve a vital role in poor communities because they give people who don’t otherwise have access to credit a lifeline.

Brett van Aswegen, chief executive of Wonga SA, said: “There is no clear demographic that identifies a mashonisa - they aren’t all big, scary men. They are ordinary people from the community who have some cash available and see this as a viable form of employment. Start-up cash can be as little as a few hundred rand but are typically payouts from a retrenchment settlement or provident fund.”

Lenders should register with the National Credit Regulator (NCR) if their loan book exceeds 100 credit agreements or R500000. But while their small size doesn’t preclude them from complying with the National Credit Act, it doesn't mean they can operate as they please, and they must comply with the National Credit Act.

Interest rates should not exceed the legal requirements and collection methods such as retaining ID books, PIN codes and bank cards are illegal.

The NCA allows for a maximum of 31% interest to be charged a year.

Last month, the North Gauteng High Court ruled in favour of the NCR and Department of Trade and Industry in the MicroFinance South Africa review application challenging regulations reducing the interest rate on the second short-term loan in a calendar year. The regulations reduced the interest rate from 5% to 3% a month.

This puts the interest charged to a reader, who would prefer to be known only as Maria from George, by her stokvel in a special category.

She asked: “Is it legal for people who belong to a stokvel (not a company, private individuals) to lend money out at 50%, and if the lender can’t pay back the amount in time, for instance the next month, another 50% is added on top of that, every month?”

In short - it’s illegal. The NCR does not regulate stokvel agreements between members, but Lebogang Selibi, its spokesperson, says this does not preclude consumers from lodging complaints with the regulator. To contact the NCR, visit

* Georgina Crouth is a consumer watchdog with serious bite. Write to her at [email protected], tweet her @georginacrouth and follow her on Facebook.