Festive Season & Black Friday Drives Retail Credit Advances to E320 Million in Q1 2023

By Phiwa Sikhondze

The Financial Services Regulatory Authority (FSRA) has revealed that the rate of retail credit spending continues to grow in the country.

According to the FSRA Quarterly Statistical Bulletin Quarter 1, 2023, the retail credit sector in Eswatini recorded a significant increase in credit advances in the fourth quarter of 2022, reaching E338 million.

The FSRA has licensed credit providers in the following categories, Developmental Finance Institutions; Credit Providers, Moneylenders; retail outlets. Other entities approved to provide credit are the building societies and SACCO’s. In total, as of March 2023, there were 186 licensed credit institutions.

According to the Bulletin, of the 186 licensed credit institutions, 7 are designated as retail credit providers. These are: OK Bazaars; Lewis; Mr Price; Truworths; Foschini; JD Group and Ackerman’s.

FSRA notes that retail credit providers are retailers that supply goods or services under a discount transaction or hire purchase agreement in line with the dictates of the CC Act.

The goods can relate to clothes, furniture, household appliances, and consumer electronic and technological gadgets. Retail credit providers have a specific focus on the items they sell and for the purpose of this article, they are grouped according to their most dominant selling items as follows: OK Bazaars and Lewis – Furniture; Truworths, Mr. Price, Foschini, Ackerman’s – Clothing and JD Group for mixed retail encompassing the selling of household appliances, electronic and consumer technology goods.

“Consumer spending on retail outlets has been on a steady increase resulting in credit advances in this sector rising to E338 million as of Q4 2022. As of Q1 2023 the value of advances declined by 6% to E320 million. Using Q4 2022 figures we realize an over E20 million increase on a quarterly basis from a figure of E318 million recorded and reported on per the FSRA Statistical Bulletin. Yearly, the changes have been significant with an improvement in credit advances of E97 million.”

The quarterly bulletin notes that the high demand for furniture and clothing by consumers, especially women and low-income earners, drove the increase in retail credit spending.

“The total number of retail credit borrowers who accessed retail credit was 11 956 in the country in Q4 2022. The breakdown of the borrowers, data indicates that women constitute a higher number compared to men in a ratio of 3:1. In the period beginning September to December 2022, the 11 956 borrowers concluded credit agreements with retail outlets to the value of E69 million, of which E49 million was related to furniture purchases alone.”

The bulletin also notes that the increase in retail credit spending coincided with the decline in savings and investment by consumers through savings and credit cooperatives (SACCOs) and building societies.

The FSRA attributed the high demand for retail credit to the social influence arising from shopping events and mass promotion or marketing events, such as Black Friday, Cyber Monday, and the festive season.

The financial regulator further cautioned consumers to be aware of the cost and risks of retail credit, as well as their rights and obligations under the Consumer Credit Act, 2021 (as amended). The FSRA reported that the interest rates charged by retail outlets ranged from 14.5% to 27.0%, and that the commission earned by retail outlets from the sale of credit life insurance was also a source of income for them. Also noted by the report is that retail outlets received a total number of 14 114 applications for credit facilities in the fourth quarter of 2022, of which over 6 800 were rejected for various reasons, including affordability. The FSRA report added that there were 77 000 accounts in the retail credit providers’ debtor’s book, of which 1% with a value of E3.2 million were written off due to default.

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