NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, October 7, 2013

GRAMEEN bank founder Muhammad Yunus, widely considered the father of modern microcredit, issued a stern warning on Friday about how microlending could become “abusive” and be misused by lenders.

This came in a week when Futuregrowth Asset Management said it would “wind down” its exposure to microlenders, including Capitec, African Bank and other unsecured lenders, on “moral grounds”.

This move is likely to invite greater scrutiny of the role these banks have played in granting credit to poorer South Africans already trapped in a debt spiral.

With South Africa failing to create a meaningful number of jobs while cash-strapped consumers continue to struggle to repay loans, some experts have warned that the microcredit bubble could pop, raising the risk of social unrest.