Credit Institutions Industry Poses A Threat To Local Financial System

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By Phesheya Mkhonta

The Financial Services Regulatory Authority (FSRA) is concerned by the credit institution industry having fewer players, but who are actually big when it comes to their various market share sizes.

This is contained in the FSRA’s Quarterly Statistical Bulletin Quarter 3, 2022. The bulletin is compiled to provide consolidated statistics and analysis relating to the quarterly performance of non-banking financial institutions and the trends observed by the Authority in the sector’s performance. 

“The credit institutions industry is not considered a competitive marketplace as it is highly concentrated with few bigger players and a Herfindahl-Hirschman Index (HHI) score of 2671 confirming the level of concentration. This level of concentration also poses a risk to the financial sector,” notes the FSRA.

The regulatory authority adds that the challenge of this huge concentration is that a failure of either one of the big credit institutions will have a significant impact on the financial system.

In terms of their market share constitution in this sector, Select Financial Services has the biggest market share at 41%, followed by First Finance at 23%, Letshego is third at 18%, with Amandla Financial Services holding 14% of the market and Getbucks fifth at 4%, while the rest of other Credit Institutions hold 1%.

Finally, the Q3 Statistical Bulletin notes that there was a change in the market share of the credit institutions industry. “There was a slight change in the market share of credit institutions during the quarter under review with Select Financial Services increasing their share from 39% to 41% and First Finance decreasing from 24% to 23%.”

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