Post National Credit Act reckless lending in the South African banking industry
-
DOIhttp://dx.doi.org/10.21511/pmf.06(2).2017.03
-
Article InfoVolume 6 2017, Issue #2, pp. 27-34
- Cited by
- 1167 Views
-
658 Downloads
This work is licensed under a
Creative Commons Attribution-NonCommercial 4.0 International License
One of the main aims of the National Credit Act (NCA) of 2005 in South Africa is to curtail rising consumer over-indebtedness by encouraging credit providers to adopt responsible lending practices. This research study seeks to ascertain whether the NCA’s responsible lending requirements have limited reckless lending by credit providers. Data are collected by a telephonic survey amongst debt counselors and in-depth interviews amongst bank employees. Descriptive statistics are used to analyze data from the descriptive survey, while data from in-depth interviews are analyzed using the thematic approach. Credit providers have divided opinions on whether the NCA limits reckless lending practices. Debt counselors claimed that credit providers are lending irresponsibly. By contrast, insights obtained from bank employees indicate compliance. However, both agree that borrowers are not borrowing responsibly. As a result, consumer education is required to educate consumers on both the benefits and risks of borrowing. It is also recommended that lenders be audited for compliance to the Credit act.
- Keywords
-
JEL Classification (Paper profile tab)G28
-
References29
-
Tables1
-
Figures4
-
- Fig. 1. Drivers of consumer over-indebtedness in SA
- Fig. 2. NCA’s effectiveness in curbing reckless lending practices
- Fig. 3. Percentage of cases caused by reckless lending
- Fig. 4. Specific reckless lending practices
-
- Table 1. Reasons why it is borrowers’ fault
-
- Aysan, A. F., & Yildiz, L. (2007). The Regulation of the Credit Card Market in Turkey. International Research Journal of Finance and Economics, 11, 141-154.
- Baird, D. G. (2007). Technology, Information and Bankruptcy. University Of Illinois Law Review, 305-322.
- Bar-Gill, O. (2004). Seduction by Plastic. North-western Law Review, 98, 1373.
- Boorstin, D. (2004). Credit History: the Evolution of Consumer Credit in America. Boston: Federal Reserve Bank.
- Calder, L. (1999). Financing the American Dream: A Cultural History of Consumer Credit. Princetown University Press.
- Carroll, A. B., & Buchholtz, A. K. (2006). Business and Society: Stakeholder Management. 6th Ed. US: Thompson South-Western.
- Cattermole, A. (2004). UK Banks Write Off of Bad Debt. UK: Bank of England: UK.
- Daniel, T. R. (2006). Improvident Extension of Credit as an Extension of Unconscionability: Discover Bank v. Owens and a Debtor’s Rights against Credit Card Companies. Cleveland State Law Review, 54, 435-465.
- Disney, R., Bridges, S., & Gathergood, J. (2008). Drivers of over-indebtedness: report to the Department for Business, Enterprise and Regulatory Reform, Centre for Policy Evaluation, University of Nottingham.
- Ferretti, F. (2007). The Regulation of Consumer Credit Information Systems: is the EU Missing a Chance? Legal Issues of Economic Integration, 34(2).
- Hartfree, Y., & Collard, S. (2014). Poverty, debt and credit: An expert-led review.
- Ironfield-Smith, C., Keasey, K., Summers, B., Duxbury, D., & Hudson, R. (2005). Consumer debt in the UK: Attitudes and implications. Journal of Financial Regulation and Compliance, 13(2), 132-141.
- Jekot, W. (2006). Over the Limit: The case for increased regulation of credit cards for students. Connecticut Public Interest Law Journal, 5(1), 109-130.
- Kempson, E. (2008). Towards a common operational European definition of over-indebtedness. European Commission.
- Laibson, D., Repetto, A., & Tobacman, J. (2003). A Debt Puzzle. In Knowledge, Information, and Expectations in Modern Macroeconomics: In Honor of Edmund S. Phelps (Ed.), Philippe Aghion et al. (pp. 228-266). Princeton University Press.
- Nantel, J., & Weeks, W. A. (1996). Marketing ethics: is there more to it than the utilitarian approach? European Journal of Marketing, 30(5), 9-19.
- Acts Online. (2005). National Credit Act, 2005. Acts Online
- Olegario, R. (n.d.) Credit Reporting Agencies: their historical roots, current status and role in market development..
- Perreault, W. D., & McCarthy, J. E. (2005). Basic Marketing: A global Managerial Approach. 15th ed. US: McGraw-Hill Irwin.
- Trumbull, G. (n.d.) Credit Access and Social Welfare in France and America.
- Pottow, J. A. E. (2007). Private Liability for Reckless Lending. University of Illinois Law Review, 1, 405-465.
- Ramsay, I. (2004). Principles of consumer regulation. Asia Pacific Consumer, 35/36(1), 8-9.
- Richards, M., Palmer, P., Bogdanova, M. (2008). Irresponsible Lending? A case study of a U.K. Credit Industry Reform Initiative. Journal of Business Ethics, 81, 499-512.
- UK. Department for Business & Regulatory Reform (BERR). (2007). Over-indebtedness. Annual Report: 2007. BERR.
- uSwitch. (2006). Affordability Study. UK: Lansons Digital Media (LDM).
- Vessio, M. L. (2009). Beware the provider of reckless credit. Tydskrif vir die Suid-Afrikaanse Reg (TSAR), 2, 274-289.
- Victoria Consumer Affairs. (2006). The Report of Consumer Credit Review. Melbourne: Consumer Affairs Victoria.
- Warren, A. (1997). Principled Approach to Consumer Bankruptcy. American Banking Law Journal, 71, 483-512.
- White, J. (2007). Bankruptcy Reform and Credit Cards. Journal of Economic Perspectives, 21, 175-199.
-
Capitalization of banks: theory, practice and directions of ensuring
Mark Myronenko
,
Olena Polova ,
Olha Khaietska ,
Natalia Koval
doi: http://dx.doi.org/10.21511/bbs.13(1).2018.16
Banks and Bank Systems Volume 13, 2018 Issue #1 pp. 173-183 Views: 3145 Downloads: 317 TO CITE АНОТАЦІЯIn the article, the essence of the concept of a banking institution “capitalization” is revealed. The current state of capitalization level of domestic banks is investigated. The directions of strengthening the capitalization are offered, which will increase the com¬petitiveness of domestic banking institutions in the world financial market and will ensure the national economy stability on the way toward integration into the world economy.
It is proved that the prospects for the development of any bank are largely determined by its capitalization level. Lack of proper development inhibits both individual banks and the banking sector as a whole.
In the context of the recent financial crisis, the provision of sufficient capital for banks has been one of the key issues, because the lack of capital was the greatest threat to the banking system stability. With this in mind, the issue of the banking system capitaliza¬tion is particularly topical.
Today, the development of the Ukrainian banking system under economic instability has faced the increase in competitiveness of domestic banks compared with foreign ones, in order to preserve the national priorities of the banking system in general under conditions of foreign capital movement.
The processes of concentration in the banking system of Ukraine are analyzed using Herfindahl-Hirschman index in terms of assets and equity, allowing to estimate the level of monopolization and, therefore, the impact on economic development. To con¬sider the increase in the level of capitalization and reliability of the banking institutions of Ukraine, it would be advisable, first of all, for banks to improve the quality of capital and to ensure a sufficient level of coverage of risks taken by banks. -
Modelling of capital structure in relation to business performance maximization
Jarmila Horvathova 
,
Martina Mokrisova ,
Lucia Dancisinova
doi: http://dx.doi.org/10.21511/imfi.15(2).2018.26
Investment Management and Financial Innovations Volume 15, 2018 Issue #2 pp. 292-304 Views: 2350 Downloads: 384 TO CITE АНОТАЦІЯThe aim of the article was to find out the optimal capital structure of the companies in relation to their maximum performance. To reach this aim, the data of the companies operating in the field of heat industry of the Slovak Republic were used. As the first method, a correlation matrix was applied. It was found out that there is statistically significant relationship between capital structure indicators and performance of the companies. Due to the lack of data in time series, the authors were not able to apply multiple regression model to assess the impact of these indicators on performance. Therefore, a method of modelling was used to analyze the impact of the change in capital structure on performance. Modelling was based on the principle of a gradual change in the capital structure in favor of debt. By the increase in debt, it was confirmed that there was a change in the values of selected indicators. In the course of analysis, it was confirmed that the value of EVA equity increased with the rising indebtedness by which the proposition I of the modified MM theory was supported. The performance expressed by EVA entity indicator is at its minimum when the capital structure is 90:10 in favor of equity. By increasing the debt, EVA entity rises. Based on these results, it can be stated that the performance of selected companies increases when the share of debt also rises, even when taking into account the rising financial risks.
-
An application of Altman Z-score model to analyze the bankruptcy risk: cases of multidisciplinary enterprises in Vietnam
Investment Management and Financial Innovations Volume 16, 2019 Issue #4 pp. 181-191 Views: 2287 Downloads: 2516 TO CITE АНОТАЦІЯThis study applied Altman Z-score model to assess the bankruptcy risk of a set of multidisciplinary enterprises of various types, mainly small and medium enterprises, with data taken from official financial reports of 180 enterprises in Soc Trang province. The binary logistic regression was employed to assess the impact of non-financial and financial factors on the bankruptcy risk of enterprises. The research findings showed that both the non-financial factors such as business area, types and size of the business, the educational level of managers and executors and other characteristics, and the financial factors (indicators) such as earnings before tax, net profit/equity ratio, earnings before interest and tax/total assets ratio, equity/total debt ratio, affect the bankruptcy risk of enterprises. Predicting the bankruptcy risk and measuring its determinants play an important role not only as an effective managing tool of the business, but also as evidence for policymakers to support the sustainable development of business.
