South Africa’s major banks will explain their lending practices and role in driving inclusive economic growth to the National Assembly’s Portfolio Committee on Trade, Industry, and Competition and Standing Committee on Finance next month.
The Banking Association South Africa (BASA) and Absa, Capitec, First National Bank, Investec, Nedbank, and Standard Bank have confirmed their attendance, said Mzwandile Masina, the chairperson of the Portfolio Committee on Trade, Industry and Competition.
“The meeting would be a fact-finding mission informed by observations made by the two committees following their meeting with the National Credit Regulator, National Treasury, and the Competition Commission late last year,” he said in a statement on Friday.
According to Masina, it has been observed that it is easier to secure credit for consumption purposes than for production. This lending approach is disempowering, particularly for previously disadvantaged people.
“As Parliament, we have a constitutional duty to conduct oversight over the implementation of legislation in the interest of consumer protection and facilitating transformation. Banks, as regulated entities, should be open and fair about their lending practices, in particular, the calculation of interest, confidentiality clauses, and the fine print on credit agreements.
“We invited the banks to engage them on issues that negatively affect ordinary and vulnerable members of society,” he added. “It would be ideal if the banks worked to advance and support economic development across all segments of society.”
In addition, the committees will invite the Financial Sector Conduct Authority to discuss the state of banking in South Africa, the credit profile within the sector, ratios of consumption credit versus productive credit per bank, bank charges, state savings, and the Protection of Personal Information Act as it relates to client confidentiality.
The committees will also discuss the expected impact of the Conduct of Financial Institutions Bill on lending practices, as well as the progress in implementing the Financial Sector Charter.
In August last year, Mmamoloko Kubayi, who at the time was the Minister of Human Settlements, proposed several measures aimed at addressing concerns about alleged discriminatory practices and improving transparency in home loan processes.
Kubayi, who is currently the Minister of Justice and Constitutional Development, expressed concerns about racial profiling, where certain individuals from historically disadvantaged groups might be unfairly rejected for home loans.
She also highlighted the lack of transparency from banks in disclosing the reasons behind rejected loan applications, which the department aimed to address through mandatory disclosures.
Read: Banks defend lending criteria amid accusations of discrimination
BASA rejected Kubayi’s allegations of unfair discrimination in the home loan application process. It said no member bank has been found guilty of systemic or institutionalised racism in a court of law.
BASA explained that banks operate under strict regulations to ensure responsible lending. Banks must protect depositors’ funds, which make up 75% of their funding, and avoid reckless lending to ensure loans are repaid.
The organisation said that according to its member banks, 48% of home loans are declined because of a lack of affordability, 34% declined because of an adverse credit record, and 13% because of unacceptable security risks.
