Tag: loans

World Bank issues loan conditions for SA

By Antony Sguazzin for Bloomberg

World Bank officials have told South Africa’s government it will need to reduce its wage bill to secure a loan and that it doesn’t want the money to be used to bail out insolvent state companies, a person familiar with the situation said.

Those demands have stalled negotiations on the loan that began in April, the person said, asking not to be identified because the content of the discussions have not been made public. Earlier this year, the South African government said it was seeking $2 billion from the bank, but later said the World Bank had $900 million available.

A World Bank spokesperson said the bank was not seeking to impose conditions around aid to state companies or trimming the wage bill, and that the $2-billion figure was incorrect. The spokesperson also said the bank hasn’t lent any other money to South Africa this year. Earlier this year, the government said it expected $50 million in virus-related funding from the lender.

In an earlier response, the World Bank said it could not comment aside from confirming that talks are ongoing. South Africa’s National Treasury didn’t respond to requests for comment.

South Africa this year has turned to multilateral lenders for the first time since the end of apartheid, overcoming political opposition from within the ruling party, as it tries to kick-start an economy forecast to contract the most in nine decades. Finance Minister Tito Mboweni is expected to outline plans to fund a revival in output when he presents the medium-term budget on Wednesday and is under pressure to earmark more money to bail out state companies.

So far the country has borrowed $1-billion from the New Development Bank, the lending arm of the BRICS group of nations, $4.3 billion from the International Monetary Fund and R5-billion rand ($310-million) from the African Development Bank.

All of those were deemed as emergency loans to combat the immediate impact of the coronavirus outbreak. An additional World Bank loan would be a standard borrowing facility and therefore could carry more conditions.

South Africa’s state-owned companies, ranging from the national power utility to the state arms firm, are surviving on government bailouts and straining national finances. A recent pledge by the South African cabinet to support the insolvent national airline has attracted criticism from opposition parties who say it is unviable.

South Africa is making an attempt to cut its wage bill. In April it reneged on an agreement to raise pay for the more than 1.2 million workers, saying it couldn’t afford it. That decision has been challenged legally by labor unions.

In August South African President Cyril Ramaphosa said the country had rejected the initial conditions it would have need to have accepted to access the funds, without giving more detail.

Any conditions could be difficult to enforce because loans and the proceeds of bond sales are not ring-fenced and are pooled in South Africa’s National Revenue Fund.

The only major loan by the World Bank to a South African state entity, a $3.75 billion loan extended to Eskom Holdings SOC Ltd to help it build its Medupi coal-fired power plant, has run into complications, with the utility wanting the World Bank to waive a condition that stipulates that it must install equipment to reduce sulfur dioxide pollution. The flue-gas desulfurization equipment would cost 42 billion rand, Eskom has said.

By Edward West for IOL

In just over a month since the R200 billion Covid-19 Loan Guarantee scheme to help small and medium sized businesses was launched, only R7-billion has been paid out – according to figures from the SA Banking Association (Basa) released yesterday.

The scheme, managed by the banks on behalf of National Treasury and the SA Reserve Bank (SARB), allows qualifying companies to apply for loans from their primary bank to fund three months operating costs, such as salaries, rent and supplier payments.

Economic commentators have criticised the scheme, arguing in particular that banks have applied normal risk vetting procedures for the loans, which were too stringent considering the plight many small businesses found themselves in and the uncertain trading environment in the future.

For instance, financial intelligence and research firm Intellidex noted on Wednesday: “The R200bn guaranteed loan scheme is a crucial centrepiece of “phase two” of the economic response to the Covid-19 crisis and is now one month old. Take-up, however, has been low.”

Basa said yesterday that the banks had approved just more than R7 billion in loans for 4 800 small businesses, since the scheme was launched mid-May.

Basa said, however, they expect the approval amount to grow as the number of applications for loans continues to increase. As at June 6, banks had received 29 700 applications for the loans.

The banks had rejected some 5 200 applications as they did not meet the eligibility criteria, as set out by National Treasury and the SARB.

Five thousand two hundred applications were also declined because they did not meet bank risk criteria.

However, about 14 100 applications were still being assessed, while 200 loans were approved, but not taken up by the applicants, Basa said.

Basa said the Covid-19 loan scheme was a commercial arrangement and required a credit approval process, to ensure that banks did not lend recklessly and to protect the fiscus,

“Business owners may be required to sign surety, based on individual bank credit processes.

In addition to the Loan Guarantee Scheme, in the two weeks to June 6, Bas members approved another R2bn in voluntary debt relief to individual customers experiencing financial distress due to the pandemic.

This brought the cumulative relief offered by banks since they started assisting individuals with targeted relief, to R16.5bn.

In the two weeks to June 6, the banks also provided additional cash flow relief, including payment breaks, to commercial and small and medium enterprises worth R1.4bn. This brought the cumulative assistance offered by banks to commercial and small and medium enterprises to R11.7bn.

Of the 131 600 applications received for relief from commercial and small and medium enterprises, more than 124 400 had already received assistance, Basa said

The cumulative assistance offered to individuals and commercial and small and medium enterprises businesses amounted to R28.2bn.

Vodacom to offer R30 “nano-loans”

Source: Bloomberg

Vodacom Group Ltd. sees its African financial-services business as a cornerstone of growth as the wireless carrier expands into products such as funeral insurance and loans of as little as $2 (R30).

The unit of the U.K.’s Vodafone Group Plc uses artificial intelligence and machine learning to customize its financial offering depending on the different needs of markets ranging from Democratic Republic of Congo to Mozambique, Vodacom Chief Executive Officer Shameel Joosub said in an interview. “Our expectations are that we can grow this business segment at those levels for the next few years,” he said at the company’s head office north of Johannesburg.

Nano-loans are growing in popularity, the CEO said, with Kenya a particularly big market. Meanwhile funeral cover is popular among South African cultures that traditionally spend relatively large sums on ceremonies, he added.

“With nano lending we give people $2 or $3 loans and they pay us back within a few days,” Joosub said. “They can get food when needed, and water, and electricity.”

Mobile financial services have become a significant source of revenue for Africa’s telecom companies as the continent’s young and growing population take advantage of a growing availability of smartphones to overcome a lack of formal banking infrastructure. An estimated 84% of Africans will have access to a mobile connection within the next five years, according to a report by GSMA.

The increased use of mobile phones could boost the sub-Saharan Africa economy by as much as $150 billion during the same period, according to the report.

Vodacom has a target of 20% annual growth for financial services over the longer term as the business stabilizes from initial greater jumps off a low base. Sales from the division gained by 37% in the six months through September. The service fees for nano-loans are typically between 5% and 20%.

Vodafone is increasingly consolidating African operations under the Vodacom umbrella, and will give management control of its Ghana business to Joosub in April. The Vodacom CEO has also been appointed to the executive committee of the U.K. parent.

How to calculate your credit score

An excellent credit score is one of the most priceless assets a potential home buyer can have. This tool has the power to secure favourable mortgage and refinancing rate, influencing everything from the size of the loan repayment to the interest rate on the home loan.

“It is advisable that potential home buyers check their credit score before even starting to look for homes or applying for a home loan, as the banks will look into your financial history and the application will be declined if you have a low credit score. The important thing is that your accounts are up to date and that you have the ability to afford the bond,” said Craig Hutchison, CEO Engel & Völkers Southern Africa.

South Africans are entitled to a free copy of their credit record every year.

“Many South Africans are surprisingly unaware of the importance of a good credit profile, many do not know what a credit profile even is, and even if they do, they seldom check their own personal credit profile. Today many potential employers look at credit profile reports as a way to judge a person’s character and level of responsibility,” said Mellony Ramalho, group executive African Bank.

Your credit score is typically a number from 0 to 999 and is calculated by using all the details on your credit profile. “It reflects a ‘score’ summary of all your financial decisions, it is often used by lenders, such as home loan and personal loan companies, to make accurate decisions on whether they should lend to you or not,” said Michael Bowren, CEO and founder Fincheck.

Overall, a credit score measures the amount of potential risk the consumer is to the creditor.

How does a credit score work?

The higher your score the better your credit health will be, which will be an advantage when applying for a home loan, making it easier for you to borrow money at lower interest rates.

“The lower the score, the higher the risk which then influences the outcome of the credit application,” advises Andile Fulane, CEO, Seed of Prosperity.

By managing your credit profile effectively, you can ensure your image and profile is viewed favorably by lenders or other organisations. A bad credit score would mean the exact opposite of this and result in almost no financial institution willing to offer you a home loan.

How do they calculate your credit score?

Your credit score is calculated by a credit bureau based on your credit report. They consider how you pay your bills, how much debt you have and more importantly, how all of that compares to other credit active consumers.

Each bureau has a different way of calculating your score and take into account different forms of information, including information their organization already holds on you, or your employment circumstances.

Your credit score is only one part of your credit report although it is almost the single most important item on your credit report; the full report gives you some handy information. Your credit report is a combined summary of your financial background with an overview of your credit score, financial accounts, profile, and rating.

What influences your credit score?

As you start transacting with various banks, retailers and other financial institutions like lenders, you start building a financial history. Your credit history will be determined by the amount of money you have borrowed in your life and how much of it you have diligently paid back on time. I still remember when I first contacted First homes perth for my new home, their first question was How much was my credit score was? Luckily I maintained my credit score over the years and landed an exceptional house they had to offer with minimal deposit.

Credit score is affected by the following:

  • Missing payments or not paying on time, even if you make double payment the following month the score will affect your credit history. “While adverse legal information is cleared as soon as the account is settled, the negative repayment history however remains for a couple years,” said Ramalho.
  • Too much debt – how much you owe and how much of your available credit you’re using – it is advisable to try to keep the use of your current credit facilities to less than 35% of your limit.
  • Negative information like a court judgment taken against a consumer’s name (commonly known as blacklisting).
  • Length of credit history.
  • Account application and enquiry activity – within a short period of time, how many account applications the consumer submitted and how many new accounts you opened.

My credit score is lower than I expected. Why is this?

Fincheck provide some reasons:

  • A credit history of fewer than 6 years, which is the time frame used to calculate your total credit score.
  • Missed or late payments over the last 6 years.
  • Holding very few credit accounts means there will be less credit history available on your profile.
  • Court judgments or record of insolvency.
  • Having a lot of unused credit available could lead to a large balance of debt if you decided to use it all at once.
  • Balances on your accounts that are very close to the credit limit indicate that you rely on credit to get through each month.

Why improve your credit score?

Credit providers measure their risk in taking you on as a client before they approve or decline your application for credit, so improving your credit score increases the chances of being granted credit on favorable terms.

How to improve your credit score

  • Regularly checking your credit report to confirm all the details are correct.
  • Making sure you make payments on any outstanding credit accounts on the due date. (Should you have difficulty in making your payments, you should contact your credit provider to agree on a payment plan, or to reduce your regular payments to an amount that you can afford to pay).
  • Consider setting up regular automated payments rather than doing manual payments.
  • If you have too many old, unused credit accounts, consider closing them.
  • If you are almost reaching your credit limit on one or more accounts, try and reduce your balance. Outstanding balances mean you have a lot of outstanding debt in your name.How long does it take to improve your credit score?

It depends on how long it will take to improve areas that need attention and maintain them, real improvement will start showing after three months of consistency, as you show progress your credit score will automatically get updated.

If you have had a couple bad experiences with your credit health, it is helpful to know that, credit inquiries stay on your credit report for up to two years, whereas more serious activities that incur namely late payments, lawsuits, bankruptcy and tax liens will stay on your credit record for up to 10 years.

How to build up a credit score if you don’t have debt

Unfortunately you won’t have a credit score if you don’t have any debt because your credit score is calculated and based on your credit habits. This doesn’t mean your financial health is bad, there’s just simply not enough data to give you a credit score. Personal loans without collateral are possible, too.

This can be bad news if you’re looking for a home loan though, so your first steps will be to apply for financial products where you can start building a credit record.

These can include:

  • Credit card
  • Vehicle finance
  • Phone contract
  • Clothing accounts
  • Consequences of a bad credit score

Not paying your account on time or at all which can result in you not getting further or desired credit when needed.

Lenders will see you as a high risk meaning that should they decide to take on that risk, they will charge high interest rates compared to someone with a good credit score.

Depending on what industry you are in – some industries such as banking – check a potential employee’s credit report and score. They consider a bad credit score as someone who is not trustworthy to work in a banking environment.

Consequences of not checking one’s credit score

It is advisable for a consumer to check their credit report every 3 to 6 months. Statistics show that only 3% of the 24 million credit active South Africans have seen and understood their credit report.

This comes as a threat of potential identity theft where someone can use a consumer’s ID to clone their profile and open lines of credit. A credit report contains so much personal information including addresses, phone numbers and employment that the leak of such information poses a big risk of fraud to the individual.

How a credit score affects you when applying for a home loan

When it comes to taking out forms of credit like a home loan, your credit score plays a vital role in your eligibility for a home loan, however it’s not the only factor to affect your application, your debt-to-income ratio will also play a big role.

What score do you need to qualify for a home loan?

There’s no specific score which will qualify you, if you follow the step to build a healthy credit score and maintain a healthy debt-to-income ratio, lenders will see you as eligible for things like home loans. Most lenders prefer to lend to an individual whose debt is less than 36% of their gross income. Visit https://onqfinancial.com/ if you want to purchase a home with as low as 0% down payment.

This, along with healthy credit habits that keep your score in the ranges above 650 will put you in a good position to secure a home loan.

If you are declined for a home loan, what should you do and when do you apply again?

It’s important to know that if you apply for any hard forms of credit like a personal loan, credit card or home loan, you will get a hard inquiry against your credit report, too many of these are a red flag to lenders.

If you have had an unsuccessful home loan application, take a step back and start improving your credit health. There’s no fixed time frame for this, it will take as long as you take to form healthier credit habits, pay back debt and wait for that very happy green indicator on your credit report.

Source: Business Tech

Sanlam warns of personal loan scam

Scammers are getting increasingly bolder in their methods to dupe consumers.

In the latest incident, financial services giant Sanlam has warned on Friday that a false entity is using its name to flaunt personal loans to consumers.

The false entity, called “Sanlam Loans SA Pty”, is circulating personal loan offers to consumers under the Sanlam brand name, using a fake logo and contact details and presents clients with a “guaranteed” loan offering of 4.5% return.

The return will supposedly be in the form “of personal, commercial, leasing, debt consolidation and home loans”.

Sanlam said it strongly disassociates itself from these loan offers and has no connections to Sanlam Loans SA Pty.

Sanlam’s loan offer is managed through Sanlam Personal Loans (Pty) Ltd, a registered credit provider.

It said its Forensic Investigations unit is investigating these offers and discouraged all clients to refrain from acting on the offer.

Sanlam is not the only company being targeted by scammers at the moment. Fin24 reported recently about a loan scam which falsely claimed to be on behalf of Wonga.com.

Wonga.com South Africa warned consumers against this loan scam after it became aware of people offering loans to consumers under the Wonga company logo, registration number and NCR number.

Consumers were urged to remain vigilant against personal loan scams and other forms of phishing by fraudsters. Consider Seattle area options for hard money, they are trustworthy.

Statistics released by the South African Anti-Phishing Service in 2013 indicated that the country is the second-most targeted country for phishing scams in the world.

In addition, the financial surveillance department of the South African Reserve Bank (Sarb) said it has seen a notable increase in advanced fee scams (also known as “419” or “Nigerian letter scams”) in SA over the last few years, particularly through the use of mobile phones.

In the Wonga.com scam the criminals sent consumers emails claiming to be from Wonga, offering them (fake) loans with unrealistic interest rates.

Once a recipient contacted the scammers, they were requested to provide personal information and to deposit various amounts of money into different private bank accounts.

This continued along with repeated requests for an advance fee payable, and the victim never receives the loan funds.

Wonga.com warned that it does not offer business loans and the only way to apply for a real Wonga loan is via the Wonga.com website – never by email or SMS.

In addition, Wonga offers a maximum loan of R2 500 for first time customers. Wonga will never request any payment upfront for a loan.

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