What does a Loan Shark Look Like?

What does a Loan Shark Look Like?
July 23 07:40 2018 Print This Article

With a new study by Wonga reporting that there could be at least 40 000 mashonisas operating in South Africa, it is important that we know how to spot a ‘loan shark’ or mashonisa before we do business with them.

The stereotypical view is that loan sharks are ‘monsters’ – big, hefty and intimidating men who knock down doors to collect their debts. And in truth, there could be some like this out there operating in the country. However, it seems that many loan sharks are simply are like you or me, doing business in their community but simply being unregistered to do so. It appears that there are many thousands of ‘ordinary’ people operating as mashonisas and doing business somewhat fairly. Brett van Aswegen, CEO of Wonga in South Africa, said: “There is no clear demographic that identifies a mashonisa – they aren’t all big scary men. They are ordinary people from the community who have some cash available and see this as a viable form of employment.”

It is important that you know the risks of using a loan shark should you decide to use one over a regulated and formal body. Wonga reports, “Mashonisas are illegal and unregulated which means their operating models are not impacted on by regulations and they incur no compliance costs in terms of the National Credit Act.” Their interest rates may also be higher than a formal lender.

The study conducted by Wonga does not seek to shame loan sharks or even scare people into not using them. In fact, it even suggests a complimentary business world where formal lenders operate alongside these unregulated companies. It says, “Mashonisas offer quick and easy access to small, short-term (less than one month) cash loans that are utilised by borrowers to manage their monthly cash flows. They are typically used to finance immediate needs such as food, transport, cell phone airtime and pre-paid electricity, and less commonly used to finance unexpected once-off expenses such as funerals. The research suggests that informal credit is not always a substitute for formal credit and indeed that consumers access both at the same time, for different purposes.” One anonymous loan shark said he simply helps out a few people in his local area with money for necessities, because their salaries are so poor, according to EWN.co.za. He is not the ‘monster’ which loan sharks are often made out to be.

It is therefore important when seeking credit that you know exactly who you are dealing with before you sign any contract. Mashonisas may indeed have their place in our society; in fact, it appears they aren’t going anywhere any time soon, but it is still vital that you do your homework, check the company or person out, and if in any doubt, avoid using them completely. It is important to be ‘money savvy’ – i.e. know how much you need to borrow, for how long, and whether you can afford the repayments.

  Categories:
view more articles

About Article Author

George McKim
George McKim

View More Articles