Many may not be familiar with the term mashonisa, but if we used the words ‘loan shark’ it might strike more than a little bit of worry into people reading about them. While valid providers of short-term payday loans like Wonga operate successfully and legally in South Africa, many loan providers are not regulated in the same way, and this is a major issue.
Earlier this year Wonga published a report examining how such loan providers who are not registered with the National Credit Regulator are far more common than many would expect, with around ‘40000 operating in South Africa, at a ratio of 1:100 for every household in informal settlements.’ The report suggested that the average value of loans offered from such sources range between R500 to R1000 with an interest rate falling between 30% and 50%.
While these figures may seem shocking, and customers using the services could potentially face shame, harassment or even threats of violence from some lenders if loans remain unpaid, Wonga revealed the research suggests there is no clear demographic that identifies a mashonisa – they aren’t all big scary men. They are ordinary people from the community who have some cash available and see this as a viable form of employment. Start up cash can be as little as a few hundred rand, but are typically payouts from a retrenchment settlement or provident fund.
The statement came from Wonga SA CEO Brett van Aswegen who also described how unregulated lenders are not always ‘the monsters that media make them out to be.’ While not all mashionas fall into the dangerous stereotype that most associate with loan sharks, of course there is a still a dark side, and opting to use them means customers never know which type they may be dealing with. Aswegen also acknowledged this percentage of lenders who do turn out to be a risk, and said the use of threats can be a result of the lender thinking ‘I cannot be seen to be weak, because weak mashonisas do not survive.’
Many people often turn to mashionisas do so because they either have poor credit records meaning they cannot secure short-term loans through traditional means, or they find mashionisas easier to deal with as they are individuals or smaller groups instead of companies. Another factor could be that agreements with mashionisas and the way that the loan will be paid back seem simple to understand if the prospect of potential hidden fees with legal companies concerns customers.
It can also seem tempting when at first loan sharks offer to extend loans or negotiate, however more they can drastically increase interest charges and even employ intimidation tactics which can become a nightmare for those using them. Being unable to pay back a first loan in time can lead to taking out a second and becoming trapped in a cycle.
Despite this risk, mashionisas are ingrained in society and seem to only be on the rise. The prospect of trying to reduce this could also be pointless suggests Aswegen who said ‘The sheer scale of mashonisas would make this virtually impossible and I don’t believe customers would want mashonisas threatened as they depend on them on a monthly basis to get by.’