Mashonisas swindling desperate grants recipients

Loan sharks use violence, threats to collect debts

The Black Sash, a human rights organisation, has urged the government to use an integrated approach to deal with illegal loan sharks who target social grant recipients and charge them exorbitant interest rates. 

The organisation says it has become common for loan sharks, also known as mashonisas in townships and villages, to use unethical tactics for surety such as withholding the borrower’s social grant cards with pin codes and IDs. Sometimes they use threats and violence when the borrower delays making repayments. 

The non-governmental organisation (NGO) recently launched a report into how loan sharks were taking advantage of desperate social grant recipients and reckless and uncontrolled lending. The report follows a series of workshops the organisation held across the country where community leaders, community-based paralegals, lenders and ordinary people were given debt and credit training.

The report was done in partnership with the London School of Economics, Stellenbosch University Law Clinic, and the National Financial Ombud Scheme SA (formerly the Office of the Credit Ombud).

According to Black Sash’s spokesperson Mongezi Mhlongo, the research also observed that the practice of illegal lending has intensified, especially among elderly people and single mothers who are grant recipients and do not qualify for formal loans.

“It is important to highlight that SA has a very high unemployment rate. Moreover, there are structural socioeconomic differences that create and perpetuate the vulnerability of women to be targeted by unregistered lenders.

Through this project, we have established that government grant recipients, who are often in dire need of access to credit, cannot borrow money fairly since they do not qualify for loans from formal lenders.Black Sash’s spokesperson Mongezi Mhlongo

“Through this project, we have established that government grant recipients, who are often in dire need of access to credit, cannot borrow money fairly since they do not qualify for loans from formal lenders. The report aims to give substance to human dignity, the achievement of equality, and the advancement of human rights and freedoms foregrounded in our Constitution,” said Mhlongo.

The report recommends collaboration among government departments and calls for an integrated approach, rather than operating "in silos", in particular, the National Treasury, the department of trade, industry and competition, the department of social development, and the department of home affairs to address issues faced by communities as a collective.

One of the recommendations is collaborations between the National Credit Regulator (NCR) and the National Financial Ombud Scheme SA (NFOSA), where they can open offices in vulnerable communities in all provinces and for both organisations to hold regular roadshows. 

“Our training demonstrated a need for financial literacy in rural or under-resourced areas. Financial inclusion means that we also share in the knowledge that we have as far and as wide as we can reach. A lack of visibility of both the NCR and NFOSA in these communities has the potential to make consumers more vulnerable to scrupulous credit providers.”

During the workshops, the attendees also told of their horrific stories of dealing with mashonisas who are normally not registered with the NCR, a loophole that allows them to charge arbitrary interest rates, potentially leading to borrowers paying triple the borrowed amount.

The attendees raised concerns about individuals facing severe financial consequences, such as being unable to pay other debts, losing belongings, and even considering suicide due to mashonisas’ aggressive practices.

“A crucial point mentioned was the unregulated nature of the mashonisa model, preventing victims from seeking help from regulators. Additionally, they highlighted the alarming tactics of mashonisas, such as employing hitmen instead of using other means for debt collection.

“One member mentioned a situation in KwaMhlanga in Mpumalanga where loan sharks took out funeral policies on debtors, naming themselves as beneficiaries if the debtor failed to pay,” said the report. 

SowetanLIVE