The announcement by Capitec that advances in its credit affordability checking model will allow it to offer unsecured loans at better rates, with some cases at the same rates as secured loans, is a giant leap in the lending model of South African banks.

Capitec explains that it will use big data, multiple regression models and new machine learning techniques to accurately assess applicants’ creditworthiness via a rigorous review of their unique financial behaviour.

In an emerging economy that has become somewhat stagnated due to macroeconomic factors unsecured lending is essential. South Africa’s high unemployment rate can only sustainably be countered if there are more entrants into the market. More entrepreneurs with access to loans will not only increase employment but the country’s skill levels improve dramatically.

It has shown that emerging economies globally that have focused on improving entrepreneurs access to the market automatically translates into improve quality on products and improved service levels due to increased competition.

What’s interesting is that Dr Ilse Botha from the University of Johannesburg and Dr Roelof Botha from the Gordon Institute of Business Science conducted a study that explores the relationship between unsecured credit and GDP.

The study showed that unsecured credit plays a crucial role in revitalising a flat economy. The model displayed a positive relationship between the growth in unsecured credit and the rate at which SA’s economy recovered from the 2008/9 recession.

Ruben T Miller