Recent research has brought the underground world of mashonisas (South Africa’s illegal loan providers) to the surface. Who are these informal lenders, really?
South Africa’s loan sharks; violent or vital?
Recent research has brought the underground world of mashonisas (South Africa’s illegal loan providers) to the surface. Once characters familiar in some quarters through headlines and stereotypes alone, a qualitative study has revealed that informal lenders may in fact quash many assumptions.
Are mashonisas violent?
You may know of mashonisas from untoward headlines and unsavoury stories. This image is likely a dominant one in the minds of many South Africans who have never had dealings with a mashonisa. While this industry is unregulated (and therefore vulnerable to more unsavory characters), many informal money lenders are everyday members of low income communities. These individuals often turn to money lending after deciding to capitalise on a small amount of disposable income.
Although research conducted into mashonisa life in an informal settlement reveals that some lenders may in some cases treat borrowers less than- scrupulously, the individuals interviewed on both sides of the lending divide very rarely reported troubling transactions. Humiliation was one of the major “misbehaviours” of mashonisas according to some reports. Some interviewed consumers claimed they were rudely treated both by their lender and the community at large for seeking a loan.
There are a few reasons why mashonisa related violence may appear lower than the stereotypes suggest. It is possible that such incidents are under reported. It is also possible that informal lenders do not profit from a negative reputation. Those who treat consumers reasonably are more likely to enjoy custom from the local community.
Based on this research, it appears that mashonisas could be a long way from the violent image they have traditionally been associated with. In fact, online loan provider Wonga’s informal lending report could be interpreted to show many mashonisas are “everyday Joes”, including former factory workers and kitchenware sales women, ranging in age from 27-48.
Are mashonisas vital?
Wonga’s study could be read as evidence for the central role of mashonisas in communities where access to short term finance is virtually non-existent. These mashonisas provide loans of R500-R5000 over short periods to individuals who need to cover the cost of crucial expenses such as petrol, school costs, food and other essentials.
Although interest rates range from 30% to 50%, in informal settlements and townships, these lenders are often the only port of call. Consumers in such communities may not have access to “official” finance options due to geographic distance from such services, an impaired credit history or no credit history. With many people outside of formal employment, it is difficult for low income South Africans to access short term finance, especially following the country’s 2005 crackdown on irresponsible lending.
Although not ideal, this dearth of conventional credit access appears to render “loan sharks” the only option for many South Africans in desperate need of capital to cover expenses. As the national cost of living continues to creep up, the mashonisa is likely to become ever more vital in South Africa.