AFRICAN Bank Investments Limited (Abil), the largest lender of unsecured loans in South Africa, is testing the home loan market, it said in its recently released annual report.
This could be a sign that some Abil customers, who do not have title deeds and are rejected by big banks, are now pushing Abil to design a loan product that caters specifically for their needs.
If Abil were to make headway with the pilot and launch a home loan product, this would pit the unsecured lender against the big-four banks as well as other mortgage providers.
"The group piloted two initiatives, involving the placing of kiosks in building stores for incremental housing and home ownership loans," the lender said in its annual report.
As a lender steeped in the understanding of unsecured credit and built on pricing the risk of unsecured credit, Abil is ideally positioned to offer a workaround for South Africa’s title deeds problem in townships and rural areas.
When the bank started its pilot on vehicle and asset finance, it said that it would stick to its principle of not repossessing.
Imara SP Reid analyst Steve Meintjes said Abil had always mentioned that a great percentage of its loans was used for home improvements — what the bank refers to as "incremental housing loans".
Mr Meintjes said the underlying assumption in South Africa was that loans from Abil were largely used for consumption.
"They are probably trying to meet a demand that arose from customers," he said.
In the report, Abil states research shows that its customers use more than 50% of their borrowings on housing, home improvements and education.
Politicians have been accusing unsecured lenders of driving consumption-based borrowings.
Among the suite of lending products Abil is exploring are student loans and financing for small businesses. "We are in exploratory discussions with various parties to facilitate targeted education loans," the company’s annual report noted.
"We have commenced an initial investigation on opportunities for small businesses."
In its remuneration report, Abil said its executive directors and prescribed officers "decided to forgo any increase in the annual cost-to-company package as a gesture towards closing the remuneration gap between the employees and themselves".
In the year to end-September, Abil paid its five executive directors a total cost-to-company package of R15.4m — R14.7m in 2011.
The total cost-to-company package is made up of a salary, contributions to retirement funds and a travel allowance.