Microfinance Practice: Re: [MFP] proposed changes to South African National Credit Act

I think you are right on Hugh about the human factor. I have a Korean friend who came to the US when she was 9. She has been a practicing lawyer for about 20 years, makes good $ in NY and for years has participated in rotating savings clubs with a group of other Korean friends. Before I worked in the MF/consumer protection field i thought this odd, but now I get it.

best,

Jami

On Mon, Jan 6, 2014 at 10:14 AM, Hugh Allen <hugh@vsla.net> wrote:

Really good article Kim that succinctly uncovers the poverty of cultural suppositions that privacy and cost are king. Here's a case where human relationships more than compensate for the cost of the service, because they make a flexible and appropriate adjustment when a customer needs it. I am 100% certain that the reason people won't leave savings groups even when they have bank accounts, is that they'd feel the loss of the security, a sense of having human value, and the pleasure these relationships can offer. The risk of technology and 'financial inclusion' (when what we really mean is opening a bank account) is not that mistakes will be made (although they often will), but that isolation and fearfulness will increase.

Hugh

From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] On Behalf Of Kim Wilson
Sent: 05 January 2014 20:57
To: MicrofinancePractice@yahoogroups.com
Subject: Re: [MFP] proposed changes to South African National Credit Act

Here is a nice write-up on what is happening in the US on exactly this topic.

http://www.theatlanticcities.com/jobs-and-economy/2013/09/why-poor-choose-go-without-bank-accounts/6783/

From: Malcolm Harper <malcolm.harper@btinternet.com>
To: MicrofinancePractice@yahoogroups.com
Sent: Sunday, January 5, 2014 2:09 PM
Subject: Re: [MFP] proposed changes to South African National Credit Act

Thanks Jeff, words can mean different things to different people.

But I happen to know someone who works in a fairly senior position for one of the 'worst offender' money shop type lenders in the UK. A single mother, immigrant, hard working and clear thinking, she is a good spokesperson for the business. It's not easy. It costs a fair bit of money to lend someone $100 for a week, 'transaction costs', risk costs, and so on, and some profit, never mind the cost of funds, it's hard to see how it can be done for less than ten dollars. "Outrageous, 10% a week, 500% a year", we say, and more if its compounded.

But it's really just a matter of fixed and variable costs; when you rent a house, or a car, there is often a high initial fee followed by a lower per period cost. Why not the same for renting money ? Maybe they should charge nine dollars fixed and a dollar a week to cover the cost of money and risk. The APR, effective interest rate, whatever, would still be 'outrageous' for one week money, but would actually be reasonable. Would the payday lenders accept something of the kind ? Has anybody asked them ?

Malcolm

From: M

Sent: Sunday, January 05, 2014 6:36 PM
To: MicrofinancePractice@yahoogroups.com

Subject: Re: [MFP] proposed changes to South African National Credit Act

Malcolm,

Good point. However you cut it a lot of money to service debts. Should be interesting to come up with a workable, low cost, scaleable alternative. Getting financial institutions to reform insanely profitable products is difficult as the efforts to reform the banking industry in the USA has shown.

Jeff
Jeffrey Ashe
jaashe@aol.com

-----Original Message-----
From: Malcolm Harper <malcolm.harper@btinternet.com>
To: MicrofinancePractice <MicrofinancePractice@yahoogroups.com>
Sent: Sun, Jan 5, 2014 1:27 pm
Subject: Re: [MFP] proposed changes to South African National Credit Act

Thank you Jami, interesting, maybe the UK government (and others too) could learn from what the SA government is trying to do. But 'disposable income' can be defined as what is left after paying taxes, or as what is left after paying for essentials such as food, housing, utilities and so on. It would be interesting to know which of these two meanings was intended in this article.

Malcolm

From: Jami Solli

Sent: Sunday, January 05, 2014 2:12 PM
To: MicrofinancePractice@yahoogroups.com

Subject: [MFP] proposed changes to South African National Credit Act

fyi article contains from very interesting stats from South Africa which you may recall has the credit legislation in place that bans 'reckless lending,' which is apparently easier said than done because they give the stats that 76% of consumers' household disposable income is being used to service debts, and more than 20% of credit active population (estimated to be 20m persons) is more than 3 mos. in arrears on loans.

Here's the full article:

https://www.compuscan.co.za/government-moves-protect-consumers-assist-indebted-households/

Best,
Jami