Financial exclusion is leaving millions of South Africans vulnerable to illegal lenders who operate beyond the protections of the National Credit Act, the Credit Association of South Africa (CASA) has warned.
In the first quarter of 2025 alone, South Africans submitted 18 million credit applications, of which 13 million were declined. CASA says these figures reveal the scale of demand for credit, but also the growing number of people who are unable to obtain finance through regulated channels.
“When a consumer is declined by a regulated credit provider, the need for money does not disappear,” says Leonie van Pletzen, CEO of CASA.
“Families still face emergencies, workers still need transport and small traders still need stock.
“If responsible credit is unavailable, many consumers are left exposed to illegal lenders who offer quick money without meaningful protection.”
Research commissioned by CASA found that formal lending to consumers earning below R10 000 per month contracted by 71.6% in real terms between 2013 and 2025. The study estimates an annual formal credit gap of R79.4 billion among these consumers. CASA’s research further found that 59% of rejected borrowers subsequently turn to illegal lenders.
Illegal lenders may charge interest of up to 600% a year and frequently operate without proper affordability assessments, transparent pricing or fair collection processes.
Consumers may also face intimidation or the unlawful retention of bank cards, identity documents and social-grant cards. Because these lenders operate outside the regulated system, borrowers often have no meaningful complaints process, debt-review protection or practical avenue for assistance.
“Financial inclusion is not simply about giving people access to money,” says Van Pletzen.
“It means ensuring that consumers can meet legitimate financial needs within a regulated system where affordability is assessed, costs are disclosed, collection practices are controlled and there is recourse when something goes wrong.”
Responsible credit supports small businesses
The financial-inclusion challenge also affects South Africa’s informal traders and micro-enterprises.
For many small entrepreneurs, household and business finances are closely connected. A small loan may be used to buy stock, repair essential equipment, pay for transport or bridge a temporary cash-flow shortage.
CASA’s research indicates that 14% of borrowers use credit for small-business purposes. When these entrepreneurs cannot access regulated finance, they may lose an opportunity to trade or turn to an illegal lender whose excessive charges can drain cash from the business and place both the enterprise and the household at risk.
“South Africa cannot speak about growing township, rural and small businesses without also addressing how entrepreneurs access safe and sustainable finance,” Van Pletzen says.
“Responsible credit can help a trader remain operational and generate an income.
“Illegal credit can trap that same entrepreneur in an escalating cycle of repayment and exploitation.”
A policy opportunity to expand inclusion
CASA believes the current government review of South Africa’s regulated rates-and-fees framework offers an immediate opportunity to advance financial inclusion. The present caps have not been meaningfully reviewed since 2015, while inflation and the operational cost of providing smaller loans have continued to rise.
According to CASA, an evidence-based recalibration of the framework would enable responsible, NCR-registered credit providers to serve more consumers who are currently excluded, significantly expanding access to regulated credit and directing consumers away from illegal lenders.
CASA stresses that this proposal would not remove price controls, affordability assessments or any of the existing consumer protections contained in the National Credit Act.
“The objective is not unrestricted lending or unchecked pricing,” says Van Pletzen.
“It is to ensure that responsible providers can continue serving consumers within a supervised market.
“A sustainable regulated market gives consumers safer options and makes it harder for illegal lenders to exploit financial exclusion.”
CASA is calling for the regulatory framework to be modernised on the basis of current economic evidence and for future adjustments to be linked to inflation. It is also calling for strengthened cooperation between government, regulators, law-enforcement authorities, payment-service providers and the formal credit industry to identify and disrupt illegal lending operations.
“The choice facing vulnerable consumers should not be between having no access to finance and borrowing from an illegal lender,” Van Pletzen concludes. “By expanding responsible financial inclusion, South Africa can protect consumers, support small enterprises and ensure that more economic activity takes place within a transparent and regulated system.”
