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Home Business

Can Mashonisas exist alongside Formal Loan Companies?

by Rohan Mathawan
October 4, 2019
in Business
Reading Time: 2 mins read
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Mashonisas, or ‘loan sharks’, are often given a bad press due to their unregulated nature. They have been associated with bad practises, such as intimidating behaviour or high interest rates. The truth is, while some are of course like this, others are fairer, ordinary members of society, who simply run a business lending small sums of money on a short term basis, which is not protected or regulated by law.

For this reason, a recent study by Wonga reported that there are approximately 40,000 of these operating across the country. It appears they are not going away any time soon, and are in fact growing in popularity. So do these informal lending practises have a place next to the regulated lenders we know?

The Wonga study says “Mashonisas are illegal and unregulated which means their operating models are not impacted by regulations and they incur no compliance costs in terms of the National Credit Act. The research highlighted that informal lenders meet a fairly specific need that is, in general, not well catered for by formal lenders. In some cases, it is entirely plausible that consumers who are unable to access credit in the formal sector would access informal sources of credit.” They go on to say, “The research suggests that informal credit is not always a substitute for formal credit and indeed that consumers access both at the same time, for different purposes.”

People who borrow money from these informal lenders are usually looking for quick access to cash to cover a one off expense, like a funeral or a medical bill. Some loan sharks can offer this money quickly and easily, with no lengthy applications. Of course, they come with risk because they are not regulated and as such provide no protection to the consumer. There are many ‘bad’ loan sharks out there, as highlighted by a letter sent into the News24 website, which said, “My problem is the way mashonisas behave, they want you to listen to them, but they don’t give you straight answers, they are aggressive, they bully, they are rude and full of threats. Some keep our Sassa cards, bank cards or IDs…in law you must be registered to own this kind of business and you must pay taxes.” This puts consumers in a difficult spot about whether to choose a loan shark to borrow money from or not.

Essentially, you must be savvy and know the company or person you are dealing with before you apply for any kind of credit with them. It would appear, for now at least, that loan sharks have a role in society for those who struggle to access credit in the formal market, but like with all things, the good comes with the bad and we must be well-researched, intelligent and well-informed when we make money decisions.

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Rohan Mathawan

Content Editor at Techstory Media | Technology | Gadgets | Written more than 5000+ articles about different niches from Tech to online real money gaming for reputed brands and companies. Get in touch Email: [email protected] For Business Enquires related to TechStory [email protected]

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