Many of us know these dodgy business people as “loan sharks”. In South Africa, the popular name for these unscrupulous lenders is ‘masonisa’. We’ve seen them in action as the fictional characters of movies, but they exist in the real world too.
Dishonest lenders prey on people who are desperate for money.
They’re unlicensed moneylenders who charge very high interest rates, and sometimes use threats and violence to frighten people who can’t pay back their loan.
So-called ‘mashonisas’ are South African loan sharks that operate outside of the protection provided by the National Credit Act. That means consumers have no legal protection from adverse lending and collection practices. It has been suggested that mashonisas can use unsavoury and intimidating tactics to enforce the repayment of loans.
Despite their reputation, borrowing from mashonisas by the poor in South Africa is widespread, typically lending small amounts that are repayable within one month. Since they are known for their intimidating and unscrupulous practices, why are they proving to be so popular?
Although mashonisas might be assumed to be a lender of last resort for borrowers who are unable to access finance from other sources, that’s not the case. In fact, many borrowers choose to use the services of a mashonisa in favour of a formal lender.
The money is often used to fund expenses such as cell phone airtime, transport costs, food and pre-paid electricity, as well as once-off expenses such as funerals.
Although the interest charges are extremely high, they are still the first port of call for many South Africans in need of a loan. Unless the formal credit market can catch up and deliver the same speed and simplicity of service, it’s unlikely this will change.
By: Lorraine Richards