Lending and borrowing between individuals in South Africa

Stokvels, collective saving and credit

Millions of South Africans contribute every month to a stokvel, a rotating savings or bulk-buying club. Some also lend to their members with interest, a practice that is tolerated as long as it stays within the group and follows a written constitution.

NASASA and the recognition of stokvels

The National Stokvel Association of South Africa represents these groups in dealings with banks and the regulator. Several banks offer dedicated stokvel accounts, which keep group savings far safer than cash held by the treasurer at home.

Family loans: the non-arm's-length exclusion

The National Credit Act does not apply to loans between relatives or close friends who are not dealing at arm's length. A written agreement setting out the amount, repayment dates and any interest still prevents many disputes when an estate is wound up.

Lending regularly means you must register

A person who regularly grants credit to others becomes a credit provider under the Act and must register with the NCR. Without registration, the agreement can be declared void and the lender may lose the right to the interest charged.

Mashonisas, the informal lenders of the townships

In Soweto, Khayelitsha or Umlazi, mashonisas lend on a handshake at very high monthly rates. When they keep a SASSA card or bank card as security, they are committing an offence and the borrower is entitled to lay a complaint.

The in duplum rule caps interest

Even between individuals covered by the Act, interest and charges that build up during a default cannot exceed the unpaid capital, under section 103 of the National Credit Act. This rule protects borrowers from a debt that would otherwise keep growing indefinitely.

Online lending platforms: a fragile market

Several South African platforms that matched lenders with borrowers have closed in recent years. Before investing, check that the platform is registered with the NCR and, for the investment side of the business, that it holds FSCA authorisation.

Regulated options for borrowing a few thousand rand

For a few thousand rand, a registered microlender provides a written agreement and capped rates. Our guide to microloans in South Africa introduces these providers and the legal limits on the term and cost of their loans.

Funeral stokvels and burial societies

Burial societies pay for funerals, a very heavy expense for South African families. They are not lenders, but some advance money to their members, and any such arrangement must be set out clearly in the society's constitution.

PayShap payments and written proof

Making the loan and every repayment by PayShap or bank transfer leaves a record that can be used before the Small Claims Court. Cash handovers, which are common in stokvels, make disputes much harder to prove later on.

South African stokvels and Namibian savings groups

Savings groups also exist in Namibia, where the rand circulates at par with the Namibian dollar. Our guide to peer-to-peer loans in Namibia shows how the NAMFISA framework differs from the rules applied by the NCR.

Recovering money lent to a relative

The Small Claims Court hears claims of up to 20,000 rand free of charge, without a lawyer. For a larger loan, a letter of demand and then a magistrate's court claim remain possible, as our guide to credit in South Africa notes.

Setting up a private loan in South Africa

1. Draw up an acknowledgement of debt showing the amount in rand, repayment schedule, any interest rate and the signatures of two witnesses.
2. Pay the money by bank transfer or PayShap rather than in cash so that you keep proof.
3. Set a reasonable rate, bearing in mind that a regular lender falls under the National Credit Act caps.
4. Keep a record of repayments received and give the borrower a copy every month.
5. If payments stop, send a written letter of demand before going to the Small Claims Court.

Costs and risks of a private loan in rand

Useful paperwork for a loan between individuals

• Signed and dated acknowledgement of debt
• Copies of both parties' identity documents
• Proof of transfer for the loan and the repayments
• Written stokvel constitution and minutes of meetings
• Letter of demand sent if payments are late

Where informal lending in South Africa goes wrong

• Handing your SASSA card and PIN to an informal lender, who then helps themselves to the grant every month.
• Lending to many neighbours with interest without registering with the NCR, at the risk of having the agreements set aside.
• Leaving the stokvel's savings in cash with a single treasurer, with no bank account and no dual signature.
• Investing through a lending platform promising very high fixed returns without FSCA authorisation.

Lenders to contact

• Capitec Bank: South African retail bank offering credit to individuals, including home loans for buying property, with applications available through an online process.
• Standard Bank South Africa: Major South African commercial bank providing borrowing solutions to individuals, notably vehicle finance through instalment sale agreements and personal loans.
• Land Bank (Land and Agricultural Development Bank of South Africa): South African agricultural development bank providing finance and loans to farmers and agribusinesses across the country's farming and food sector.
• Capitec Bank: South African retail bank providing credit solutions to individuals, including personal loans and credit cards, through its personal banking offer.

Private loans in rand: your concerns answered