Faculty of Management Sciences
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Item Unfair credit practices, borrower challenges and risks, and the role of the National Credit Act in the eThekwini Metropolitan Area(2024) Zulu, Lungelo Percival; Msuya, Norah Hashim; Womack, Anna Johanna CathariThe South African government enacted the National Credit Act No. 34 of 2005 (NCA) primarily to increase consumer access to credit markets, protect consumers from unfair credit and credit-marketing practices by credit providers, promote a fair, accessible marketplace, and establish national norms and standards relating to consumer protection, as well as reduce consumer over-indebtedness. Consequently, credit providers are obligated to adhere to strict rules and regulations when determining a credit consumer's affordability prior to granting home loans. Given the importance of the NCA and the absence of support consumers received from the previous Usury Act No. 73 of 1968 and the Credit Agreements Act No. 75 of 1980, this research seeks to investigate unfair debt practices, challenges and risks experienced by borrowers in connection with unpaid debts, and the role and strategies of the NCA in addressing such challenges and risks. The study employed a quantitative research method. Respondents (credit consumers) completed a survey questionnaire (hardcopy or online) by indicating their credit perspective in terms of unfair credit practices encountered within the market; challenges when trying to access credit; risks in connection with unpaid debts; and the strategies of the NCA to prevent such challenges and risks; along with awareness of the Act. The data strongly suggested borrowers encountered multiple challenges and risks, as a direct result of unfair credit practices by providers. An overall analysis revealed borrowers are unclear regarding the NCA and its provisions. However, findings revealed the NCA does play a significant role in regulating the South African credit market. Prior to enactment of the Act, only a percentage of low- and middle-income groups had access to credit; to ensure equal access, a formal, accessible credit market had to be established.Item Economic role of derivatives on bank lending, firm value and economic growth : evidence of South Africa(2021-11) Chikwira, CollinThe South African financial system has had substantive growth in the derivative market from 1996 up to the present day. The instruments are growing at an astonishing rate, although the economic growth of South Africa was unstainable. It is growing at a slow rate that cannot be matched to the rate of derivatives growth. However, the causal analysis of derivatives markets and economic growth in developed market economies revealed that the variables tend to move together over time. What remains thorny to researchers is the question as to why such a relationship exists. Is it a pure coincidence, wealth effect, or is the derivative market a mirror or a leading indicator of the economy, or does the derivatives market drive the economy or reverse? The present study wishes to find out the answers to such questions regarding South Africa through examine the impact of derivatives on bank lending and firm's value and consequently economic growth. This study is predominantly quantitative, and it followed financial development-growth nexus studies to establish its methodology. The adoption of the methodology followed that derivatives are regarded as part of financial development instruments among stocks, bonds, bank loans, and other financial instruments. In terms of the estimation technique, the system generalised method of moments (GMM) was deemed appropriate due to its wellacknowledged ability to account for endogeneity prone with panel data set and growth-related models. This study revealed that derivatives, irrespective of type, positively influenced lending in the banking industry. Thus, the evidence shows that loan portfolios of banks that participate in derivative instruments increase. In addition, the analysis shows that derivatives permit banks to lend more to the private sector; there is a positive statistical relationship at 1 percent significance. Listed non-financial firms on the Johannesburg Stock Exchange use derivatives to manage foreign exchange, market, price, and interest rate risks during their operations. The results obtained suggested that the use of derivatives generates value for non-financial firms. There is a significant hedging premium for South African non-financial firms that use derivatives. Derivatives permit more significant extension of credit to the private and public sectors, which impacts the economic growth of South Africa; that is, if there is a 1% change in the loan portfolio growth, the real GDP of South Africa expanded by 1.52%, as estimated by the research findings. Also, derivatives allow non-financial firms to undertake capital investments, increasing the yearly South African real GDP by 1.15% if there is a 1% change in the firm value. It is observed that economic growth pinned its roots in the efficiency of the banking sector. Banks effectively provide funding through lending to the private sector to secure credit and interest rate risks with derivatives. Thus, it is availing liquidity in an economy that is essential for the firms to capitalise, finance capital projects, and invest in opportunities to derive economic activities. Thus, economic growth increases the production of quality goods and services through the private and public sectors. The research findings documented in this study supported policies to inspire the development of derivative markets as part of financial development. This can help deepen the financial sector in South Africa, which will help stimulate economic growth. Therefore, it is recommended that policymakers adopt strategies that reinforce the development of derivative markets in the country through fiscal or monetary interventions.