JOHANNESBURG - Outdated credit pricing regulations have led to formal lenders rejecting over 70% of loan applications.
This in turn is making it difficult for consumers to access credit.
Since 2015, there has been no revision of interest rates, service fees, or initiation fees, leaving lenders unsustainable.
This is according to Pletzen, CEO of MicroFinance South Africa who spoke to eNCA.
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She says as a result of this credit providers have become more cautious.
"We are seeing credit providers retracting from the insider others going underground with illegal and some are tightening their wheels and won't be able to give credit," she said.
According to Van Pletzen, many regulated lenders operate in areas with no banks or ATMs, making it increasingly difficult for them to sustain their businesses.
As a result consumers, in turn, are left vulnerable, often resorting to illegal lenders leaving them in a debt spiral with increasing interest rates, she says.
Van Pletzen says to address the matter they are engaging the National Credit regulator and the Department of Trading Industry and providing suggestions on what should change the situation.