Bank's sudden credit cutback a serious blow

The SA banks’ sudden credit cutback, in one operation, from 1st June 2007 (when the National Credit Act came into force) impacted negatively on many sectors of the economy – and speeded up the drop in the GDP, says Shiraaz Hassan, Marketing Director for Asrin Property Developers.

“It is,” said Hassan, “widely accepted that the Act was necessary – but my view is that it should have been judiciously phased in over a period of 12 to 18 months. Cutting off credit in one go the way the banks have done has pulled the rug out from under the feet of SA’s consumers.”

The banks’ excessive aversion to risk of any kind has made it extremely difficult for even well resourced buyers with secure employment to procure adequate finance – but for Asrin itself the cutbacks, although very definitely not welcome, have not been the death-blow that they have for some others, said Hassan.

“We have about R900 million worth of projects, both residential and commercial, on which we are 75% sold out. We are, therefore, in a position to weather the storm. I am, however, concerned that others may not do so.”

The banks’ attitude, said Hassan, is all the more regrettable because it was their reckless lending policies in the boom times which were largely responsible for the problems now confronting the housing market.

“Prior to the implementation of the NCA many cases were reported where comparatively young, low earning middle managers were offered credit on a random basis, without sufficient checks on their track records – and very often without their even asking for credit.”

Hassan also criticised the banks’ current mark-ups on the Repo rate, saying that in his view these are far too high.

“As a first step in assisting with a recovery the banks could well look at cutting back on this mark-up by at least 1%.

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