The Banking Association of South Africa (BASA) has responded to Human Settlements Minister Mmamoloko Kubayi’s criticisms regarding the high rejection rate of home-loan applications from previously disadvantaged groups.
Kubayi has advocated for stricter legislation to compel banks to disclose more detailed information about their mortgage lending practices and to increase penalties for non-compliance.
BASA said in a statement that every bank has its own business and risk criteria for extending home loans and other forms of credit – race is certainly not one of them.
"South Africa’s banks hold in trust the savings and salaries of South African workers, professionals and businesses. This makes up approximately 75% of the funding of banks and they have a fiduciary responsibility to protect these depositors’ funds.
"Because of this, the country’s banks are strictly regulated by the relevant authorities to ensure that they do not lend recklessly and that those who are lent depositors’ funds are able to repay their loans, thereby protecting the savings that need to be available on demand," it said.
It pointed out that the National Credit Act sets out the affordability criteria for responsible lending, to which banks must adhere, to ensure that customers do not become over-indebted.
"It is the business of banks to lend using financial products and services, like home loans. As such, they are incentivised to lend as much as possible. Banks do not want to turn away customers."
Citing BASA members, the association noted that 48% of home loans are declined because of a lack of affordability; 34% because of an adverse credit record and 13% because of unacceptable security.
"A lack of affordability and an adverse credit record is more often than not a result of the weak economy that has created persistent unemployment and economic hardship."
BASA said it has also engaged with the National Department of Human Settlements on a Title Deeds Restoration Programme, which will give households security when applying for credit and help create a more robust affordable housing market.
"BASA has long acknowledged that the racial inequalities in wealth and ownership in South Africa have their roots in apartheid and has partnered with government to bolster inclusive economic growth and the transformation of the economy. However, it remains primarily the responsibility of government to create an enabling operating environment, so that companies can grow and create jobs, allowing South Africans to meet the affordability requirements set out in law."
BASA and its members have been engaging with the Department of Human Settlements on initiatives to make housing finance more affordable and accessible, including the First Home Finance Subsidy Programme, the organisation said.
"Allegations of unfair discrimination by banks remain unfounded and are frankly irresponsible. BASA and its members are opposed to unfair discrimination of any kind. To date, no BASA member bank has been found guilty in a court of law of systemic or institutionalised racism."
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