The Regulation Of Financial Markets For Low-Income Earners In South Africa

Many low-income earners have financial challenges and experience over-indebtedness in their activities as they do not have access to formal financial institutions. They often acquire loans in informal sectors where they pay high interest rates. The individuals who qualify for such loans are those who have salaries or receive social grants from the government. Access to regular income serves as a guarantee to secure a loan from money lenders. The individuals lack access to formal banking institutions because they are unable to fulfil the banks' stringent requirements. They often need money to maintain their lifestyle or cover financial obligations for their relatives. They require huge amounts of money to settle loans they obtained to cover their living expenses and other materials. Micro lending is regulated both in international law and in South Africa. The National Credit Act promotes responsible borrowing and prohibits over-indebtedness. It protects the rights and responsibilities of both consumers and credit providers. There are additional costs for persons who buy on credit, including initiation fee, service fee, credit insurance and interest rates. Creditors can use emolument attachment orders to recover their moneys from the borrowers or consumers. Courts supervise the emolument attachment orders and safeguard fairness to both parties. Over-indebtedness leads individuals to live in debt spirals and experience financial distress. There is a need to regulate the financial market for low-income earners to ensure that they do not become over-indebted. Some measures, such as regulation of interest rates, are needed to protect low-income earners in the financial market.