South Africa’s credit landscape is evolving rapidly. As household finances remain under pressure and demand for short-term credit accelerates, alternative and non-bank lenders are playing an increasingly central role in meeting consumer needs.
By Fatgie Adams, head of credit risk solutions at TransUnion South Africa
But with this shift comes a growing challenge: how to expand access to credit responsibly, without deepening the cycle of over-indebtedness that continues to undermine financial resilience in many households.
Recent findings from the TransUnion Q4 Consumer Pulse Study show that while confidence in future household finances remains strong, short-term financial pressure persists. In Q4 2025, 72% of consumers were optimistic about the year ahead, yet 36% expected difficulty meeting current bills and loan obligations.
Credit remains central to financial planning, with 91% saying access to credit is important, but only 42% feeling they have sufficient access, and just 36% planning to apply for credit in the next year, reflecting caution driven by cost and income concerns.
Where formal credit systems fail to meet this demand, many consumers are left with few alternatives. Limited access to traditional banking, particularly in informal and semi-formal economies, often pushes consumers toward unlicensed money lenders, or aboMashonisa, who offer small, high-cost loans. In this context, over-indebtedness is less about irresponsible borrowing and more a by-product of financial exclusion.
Protecting consumers without shutting them out
Lenders face a delicate balancing act. On one hand, rising delinquency rates, particularly in non-bank personal loans, signal increased risk. On the other, tightening credit criteria too aggressively can unintentionally drive vulnerable consumers into far riskier informal markets.
This is where innovation in data and analytics becomes critical. Traditional credit assessments, which rely on point-in-time credit reports, often miss the full financial behaviour of today’s borrowers, especially thin-file or credit-invisible consumers. Some may appear low risk because their reports reflect only traditional credit obligations, while in reality they depend on recurring payday loans.
These short-term loans are usually settled before reporting cycles, meaning they never show up as outstanding debt and create a significant blind spot for lenders. Others may have no formal credit footprint at all despite demonstrating stable income or consistent spending patterns.
Advanced, trended data allows lenders to move beyond static snapshots and towards a more dynamic understanding of consumer risk. Analysing borrowing patterns over time including repeated short-term loan usage or high-velocity credit enquiries allows lenders to identify early warning signs of financial distress before default occurs.
Expanding visibility, reducing harm
Alternative data sources are playing an increasingly important role in bridging information gaps.
Behavioural indicators such as mobile usage, airtime purchasing patterns and transaction consistency can provide meaningful insights into affordability and liquidity, particularly for consumers operating outside the formal banking system.
Used responsibly, these data points can support more accurate affordability assessments and help lenders extend credit to consumers who would otherwise be excluded.
This approach is especially relevant as younger consumers enter the credit market. TransUnion data shows that Gen Z now dominates new-to-credit originations, signalling a generational shift in how first-time borrowers engage with credit.
While this presents significant growth opportunities, it also underscores the need for robust financial literacy and responsible onboarding. Younger consumers are more likely to rely on non-bank credit and are also experiencing higher delinquency rates, making early engagement and education essential.
Managing the back book is as important as booking new business
Responsible lending does not stop once a loan is approved. In a high-pressure economic environment, managing existing loan books is just as critical as onboarding new customers.
Monitoring behavioural signals, such as increased credit shopping or missed payments elsewhere, allows lenders to engage customers before financial stress escalates.
In many cases, early intervention can prevent defaults, protect loan books and support consumers through temporary liquidity challenges.
Collaboration is key to curbing over-indebtedness
No single lender or institution can address over-indebtedness alone. A sustainable credit ecosystem depends on collaboration, transparency and timely data sharing across the industry.
When lenders do not submit accurate and up-to-date information into the credit ecosystem, blind spots emerge, allowing consumers to access multiple loans in quick succession without visibility across providers.
Participation in industry bodies and data-sharing frameworks strengthens collective risk management and helps curb predatory practices.
Building a more resilient credit economy
Over-indebtedness is not an inevitable outcome of credit growth. With the right tools, data and collaboration, lenders can expand access responsibly while protecting both consumers and their businesses.
Innovation in credit risk assessment is not about restricting credit, it is about ensuring that credit works as a pathway to financial inclusion, not a trap.
As South Africa’s credit landscape continues to shift toward alternative lending models, the industry has a unique opportunity to redefine what responsible access looks like. Seeing data-driven insights, early intervention and industry collaboration as priorities enables lenders to build a more inclusive, ethical and resilient credit economy, despite ongoing economic pressure.