Less credit coming round

The global economy is in crisis.

This is one of the largest market crashes ever, and even here in sunny South Africa we are not totally immune to the effects of the global credit crunch.

The whole problem was started by the risky lending practises of the western world's major financial institutions.

These self same institutions now lie in tatters, ripped apart by their own weight of debt. So what does this really have to do with South Africa? Well, we had the foresight to introduce the National Credit Act already in 2007.

This act essentially tightened up the rules for lending way before the proverbial fan hitting began. This has allowed us to lessen our exposure to the risky lending vortice that is pulling the rest of the world into its gaping mire.

The act essentially sets out rules for what lenders need to do in order to not give credit recklessly. Reckless lending is what led the US mortgage market to collapse.

You could get a so called 'liar loan' whereby you could say that you earn whatever you felt like, safe in the knowledge that the bank would not actually verify this.

This caused people to frequently and vastly overstate their income to get a bigger badder mortgage.

So when the market turned and house prices no longer just kept on going up and up, the debt to income ratios flipped and the crash came on.

After the National Credit Act was instituted here the onus was put on the lending institution to perform its due diligence and not lend to people more than they could afford to carry.

The banks were essentially made liable for defaulting debts.

This basically led to a slow down in how much credit was available as the lenders were no longer as slap happy in dishing out the cash. According to new data released this week by the Reserve Bank credit extension slowed down in February to 11.05% compared to 11.85% in January.

However this still means that credit extension is growing.

We are still lending in South Africa.

In other parts of the world lending has come to a stand still, banks don't even want to lend to each other, they are still getting Minsky moment shivers and shudders.

Whole countries went bankrupt.

We don't have this problem here in South Africa.

The sun is still shining, the economy may be cooling, but in general we are fairly decoupled from the crisis gripping the rest of the world.

So if you still want to get some debt you can find a personal loan or compare credit cards with Justmoney, South Africa's online guide to money.

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