Loan sharks target social grant beneficiaries

A recent report by the Black Sash and London School of Economics (LSE) reveals a trend of financial lenders targeting social grant beneficiaries with excessive interest rates on low-risk loans. In some cases, lenders use child grants as collateral for loans despite this being an illegal practice.

In the Western Cape, the report focused particularly on the previously disadvantaged areas of Khayelitsha and Delft.

MPP Gillion Bosman says: “As Chairperson of the Social Development Standing Committee at the provincial legislature, I will invite the Black Sash and LSE researchers to brief the committee on their findings, and together navigate possible legislative and policy amendments to bring this issue to an end. Our options may include a ban on lending by third parties already contracted by SASSA.

This significant report shows that interest rates range between 50 – 112% of the principal loan amount. And in many instances, those providing the funds are in fact contracted by the South African Social Security Agency (SASSA) to provide the mechanisms for grant payments.

Such loan sharks are undoubtedly taking advantage of their access to grant beneficiary personal details, and subsequently exploit the financial burdens of those already reliant on state welfare. Without intervention, this practice will perpetuate a poverty cycle as beneficiaries struggle to get on top of debt, especially in the face of such exorbitant interest rates.

We further need improved implementation of existing acts, such as the SASSA and National Credit acts. To do this, the national Department of Social Development needs to consider broadening debt counselling, providing a hotline for reporting lending irregularities, and work with other departments – including the SAPS – to investigate these specific crimes.”

As we safely move forward and rebuild our economy, it is critical that the safest financial environment is upheld and opportunities are provided for improving the dignity of all vulnerable communities.