COVID and Credit
COVID-19 changed the world; our credit insights are designed to inform how the financial landscape continues to shift. Our analyses noted the changes in the South African market both immediately after, and one year on from the Level 5 Hard Lockdown in March 2020.
We used data gathered during their loan application process to shine some light on the impact the COVID-19 pandemic and the national lockdown has had on consumers. By comparing loan applications prior to the commencement of lockdown with those made after the lockdown began, we were able to gather interesting insights into the changing status, behaviours and financial wellbeing of consumers.
During the hard lockdown
General decrease in short-term loan dependency; There was a 32% reduction in applicants who held more than one other short-term loan from any lender during lockdown.
Changing credit scores
51% of customers had a higher credit score than they did before lockdown. Transunion credit scores across all applications increased by an average of 25 points.
How incomes were impacted
According to TransUnion’s report, 21% of South Africa consumers reported that they lost their jobs as a result of the pandemic. Wonga looked at the changes in applicant’s industry or profession, finding that there was an increase in applications made by many essential service employees. There was also a drop in applications from the industries that suffered the biggest losses as a result of lockdown.
We saw more applications from people in the health, electricity, mining, legal services, and transportation sectors.
Industries under pressure
There was a decrease in applications from the hospitality, business consultancy, cleaning, leisure, culture and publishing industries
One year later
More than a year after South Africa’s hard lockdown, South African short-term lender Wonga has noted significant changes in the credit market. These findings indicate that while there appears to be a better-than-expected recovery among customers who appear to be in less debt, lenders continue to carefully monitor their risk when issuing credit – impacting the ability of consumers to access unsecured loans to manage their needs.
Short-term loan applications
Our research highlighted that there has been a 17% decrease in customers applying with one or more other short-term loans active on their credit record compared to 2020.
Short-term loan usage
We noted that the amount of short-term loans held by each applicant dropped during the national lockdown, with a 32% reduction in applicants who held more than one short-term loan with another lender.
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