Online short-term loan company Wonga.com says there are South Africans who borrow money from the service up to four or five times a year.
UK headquartered Wonga.com, which launched its services in South Africa last year, offers loan amounts of up to R2,500 for new customers and R8,000 for existing customers.
And Wonga.com SA chief executive officer Kevin Hurwitz has told ITWeb Africa that South Africans have taken to the service.
“We are finding customers are using our service around four or five times a year – we are not comfortable with them borrowing more frequently than that,” Hurwitz said.
“Our service is designed to help consumers who are experiencing a short term cash flow problem – we are not here to provide a revolving source of credit,” he added.
Hurwitz added that South Africans have taken to the service despite low internet penetration levels in the country.
The total internet population in South Africa in 2013 has been estimated to be 14 million users or 39% of the adult population, according to research conducted by the Digital Media and Marketing Association (DMMA) and Echo Consultancy this year.
“We knew that the lack of internet penetration in SA would pose a challenge to our online process – but we have been pleasantly surprised by the fact that our customers are willing to transact using their cellphones,” said Hurwitz.
“We accept tens of thousands of loan applications each month; however, the amount of consumers visiting our site is much higher than that. This is because we only accept approximately 25% of first time applicants,” added Hurwitz.
The short-term loan company in July this year released results of a survey that said that among 12,000 Wonga SA customers, 45% of respondents said they have used a loan to cover an unexpected and important expense.
The survey results also revealed that some of the top reasons for applying for a loan include essential household items (22%), urgent bills (18%), school or college fees (14%), motoring costs (12%), utility bills (10%) and dentistry or medical expenses (7%).
According to Chris Hart, the chief strategist at Investment Solutions, services such Wonga.com work because they are convenient for people in need of short-term loans.
Hart, though, explained that if people are using such a service up to four or five times a year, it could mean that some South Africans depend on loans for expenses that should be covered by their incomes.
“Four to five times is a lot as it shows personal financial issues,” he said.
According to figures by South Africa’s National Credit Regulator (NCR), there were more than 20 million credit active consumers in South Africa in the first quarter of 2013.
In total 9.53 million of them had impaired records, it was revealed by the statistics.
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