TransUnion’s Q2 2024 South Africa Industry Insights Report shows a 15.2% increase in overall credit originations, indicating that South Africans are increasingly using new and existing credit products to meet their rising consumption needs through credit cards, personal loans, and retail revolving loans.
The number of credit-active consumers grew by 4.7% year-over-year to 18.5 million, with 28.1% holding credit cards.
This shows that more South Africans have access to financial products and services for essential lifestyle needs.
Consumption-led products, which are used for day-to-day expenses, accounted for 83% of all new credit opened, growing by 16.8% year-over-year in Q2 2024.
The credit market in the country had an outstanding balance of R2.37 trillion, up 3.7% year-over-year, with total balances within consumption-led products increasing by 5.1% year-over-year.
“Growth in new credit products issued and use of existing credit is typically driven by economic requirements as consumers take on credit to boost their available income during challenging economic times,” said Lee Naik, CEO of TransUnion Africa.
“However, there is hope on the horizon as inflation decreased during the quarter, with annual food price inflation at its lowest since late 2020. Consumers are likely to see further respite in the coming months, along with the reduction in interest rates this combination will likely provide relief to stretched household budgets.”
Table 1: Summary of Q2 2024 Metrics for Major Consumer Credit Products
Product | YoY Growth in Origination Volumes | YoY % Change in Total Outstanding Balances | Serious Account Delinquency Rate* | YoY Basis Points (bps) Change in Delinquency Rate |
Credit card | 9.3% | +10.3% | 12.4% | -0 bps |
Personal loans** | 16.7% | +2.6% | 32.6% | -240 bps |
Home loans | 16.2% | +3.2% | 7.2% | +50 bps |
Vehicle asset finance | -5.0% | +3.0% | 5.4% | -10 bps |
Clothing accounts | 12.2% | +8.9% | 28.5% | -150 bps |
Retail revolving | 25.2% | +12.2% | 17.4% | -230 bps |
Retail instalment | -6.6% | +12.9% | 27.9% | -180 bps |
Personal loan originations saw a 16.7% year-over-year increase in Q2 2024, making up 77% of all new credit originations. However, the average new loan amount dropped by 14.2%, indicating that lenders were offering smaller amounts to balance portfolio health and rising consumer demand.
Over the past year, most new personal loans were for amounts under R5,000, with these smaller loans making up 75% of new loans in Q2 2024, up from 73% in the same quarter of 2023. In Q2 2024, 3.2 million consumers took out new personal loans for R5,000 or less, compared to 1.9 million in the same period of 2023.
Lenders are closely examining risk profiles. In Q2 2023, 77% of consumers who took out personal loans under R5,000 had a below prime risk profile, which decreased to 74% in Q2 2024.
Non-bank lenders granted 90% of loans under R5,000 in Q2 2023, compared to 86% in Q2 2024. Meanwhile, bank lenders increased their share from 10% in Q2 2023 to 14% in Q2 2024. These trends show that lower amount loan seekers are driving growth for both bank and non-bank lenders.
Account-level delinquency rates improved by 240 basis points year-over-year to 32.6%, indicating that cautious risk management by lenders has helped reduce delinquency and support consumers in managing their debt.
Demand for personal loans remains strong, with 33% of consumers in the Consumer Pulse Survey planning to apply for a new personal loan in the next 12 months, more than any other credit product.
A recent study of TransUnion’s South African credit card population found that credit card growth has been driven primarily by existing cardholders opening additional new cards. However, the number of first-time credit cardholders is rising rapidly. In the most recent quarter, 38% of originations were issued to first-time cardholders, the highest proportion since Q1 2020.
“Opportunity exists to enable greater access to financial inclusion by getting the first credit card into a consumer’s wallet,” said Naik.
Mortgage growth continued, especially in the affordable housing sector. Despite high interest rates in Q2 2024, mortgage originations grew by 16.2% year-over-year, with the average new loan amount increasing by 1.7% to R940,675.
In the first half of 2023, 32% of mortgages were granted to subprime and near prime consumers, increasing to 36% in the first half of 2024.
Mortgages granted to super prime borrowers declined from 41% in the first half of 2023 to 37% in the first half of 2024.
“The growth in mortgages in the affordable housing bracket and the increase in mortgages granted to below prime borrowers seem to highlight banks’ intent to support South Africans in their quest to own property,” Naik said.
“We also note that while there’s been growth in originations, the rate of growth has also increased substantially, which may in turn indicate increased homeowner confidence, supported by banks’ confidence in the country’s property market and in their risk strategies to accommodate more lenders."
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