By Phiwa Sikhondze
The Eswatini Credit Providers Association (ECPA) has reported an uptick in loan applications for January 2025 compared to the same period last year, with the rise attributed to various factors, including the start of the school year and growing household financial pressures.
Thulani Dlamini, Chairperson of ECPA, shared insights into the current lending trends and addressed concerns around loan affordability, rising interest rates, and the challenge of unlicensed lenders in the market.
ECPA members include Amandla Financial Services, First Finance Company, Letshego Financial Services, and Select Limited.
Dlamini highlighted that January has traditionally been a peak period for loan applications, driven by the need for financial support to cover school fees, household expenses, and other commitments.
While this year’s demand is part of an ongoing trend, the increase in loan applications is notable, especially as some credit providers have seen consistent demand for the past six months.
“January is typically a high-demand month for loans. The start of the year brings significant financial pressure, especially with school fees, and this year we’ve observed a broad upswing across the industry compared to last year,” Dlamini said.
“Although this increase is encouraging, the economic conditions remain a challenge. Many people, especially civil servants, have seen stagnated salaries, which affects their borrowing and repayment capacity.”
As for the types of loans most in demand, personal loans have been at the forefront, with many individuals seeking financial assistance for education, home improvements, and vehicle repairs.
Dlamini noted that educational expenses continue to be a significant driver of loan demand, reflecting the growing recognition of the importance of education in the country.
“Educational loans have seen a significant increase, which is a positive trend. We also see loans being used for land purchases, home renovations, and even debt consolidation as borrowers restructure their finances to manage payments more effectively,” Dlamini added.
Another rising category is small, short-term loans, such as payday loans, which are being used to cover everyday household expenses. This increase reflects the economic strain faced by many households in Eswatini.
The question of whether rising loan demand is leading to higher interest rates was addressed by Dlamini, who explained that while interest rates may fluctuate due to inflation and regulatory factors, credit providers are committed to offering competitive rates while ensuring responsible lending practices.
“Our members conduct thorough affordability assessments before approving loans. We are focused on making sure that borrowers can meet their repayment obligations without falling into financial distress. We also offer flexible repayment options to help customers manage their loans effectively,” Dlamini emphasized.
With the growing demand for credit, there are concerns about loan defaults. Dlamini acknowledged that economic challenges could impact repayment behavior, but reassured that credit providers are taking proactive steps to mitigate over-indebtedness.
“While default rates may vary, we place a strong emphasis on affordability checks before issuing loans. Financial literacy plays a critical role in preventing over-borrowing, and many of our members offer debt restructuring to help borrowers manage repayments during difficult times,” he said.
Another pressing issue is the rise of unlicensed lenders offering quick loans with potentially harmful terms. ECPA continues to advocate for consumer protection, urging borrowers to verify the legitimacy of lenders before taking out a loan.
“We strongly encourage the public to only borrow from licensed credit providers who adhere to ethical lending practices. If in doubt, borrowers can always consult the Financial Services Regulatory Authority (FSRA) for guidance,” Dlamini advised.
Given the current economic environment, Dlamini anticipates that loan demand will likely remain high as people continue to turn to credit for essential expenses. However, he stressed the importance of borrowing responsibly.
“As inflation and economic difficulties persist, more people will seek credit for necessary expenses. While credit can be a useful financial tool, it is crucial that individuals only borrow what they can afford to repay, ensuring their financial well-being in the long term,” he explained.
Looking ahead, Dlamini believes the future of the credit industry in Eswatini will be shaped by digital lending and financial inclusion efforts. He emphasized that the ECPA will play a key role in advocating for a responsible, stable credit market, collaborating with regulators and credit providers to ensure a transparent and accessible financial environment.
“We envision a future where digital lending plays a larger role, making access to credit faster and more efficient. As ECPA, we will continue to champion responsible lending and financial education to support consumers and strengthen the credit industry in Eswatini,” Dlamini said.