As Finance Minister Enoch Godongwana prepares to table the Medium-Term Budget Policy Statement (MTBPS) on 21 October, Prime Loans urges government to prioritise reform of the short-term credit framework, warning that outdated pricing regulations are restricting access to legal credit and risk pushing more financially vulnerable consumers towards illegal lenders.
The call comes as financially pressured households face a difficult economic environment. According to Statistics South Africa, annual consumer price inflation stood at 4.4% in August 2026. Rising costs are also outpacing what households take home: petrol prices have climbed nearly 40% over the past year – from R21.63 to R30.25 a litre for inland 95-octane fuel – while independent salary data from PayInc shows real, inflation-adjusted take-home pay down 2.1% in the first seven months of 2026. This is leaving households with less disposable income, reducing their spending power and making it increasingly difficult to absorb unexpected expenses.
Short-term credit is an essential tool for helping consumers met with unexpected financial shocks. When regulated and priced fairly, it gives people access to funds without exposing them to the predatory rates and practices. These loans help support families with everything from buying school uniforms to covering unexpected medical expenses, serving a critical function when financial planning isn’t sufficient.
At the same time, access to regulated credit remains constrained. The National Credit Regulator’s Consumer Credit Market Report for the quarter ending March 2026 recorded a credit application rejection rate of 66.21%, meaning nearly two-thirds of applications were declined.
For lower- and middle-income consumers who may not qualify for traditional banking products such as credit cards and overdrafts, these constraints can leave few options when unexpected expenses arise.
“When an application is declined, the need for credit doesn’t disappear with it. Too often, consumers are left with nowhere to turn but informal lenders and loan sharks who operate outside the law, exposing them to far greater financial and personal risks,” said Nita Morgan, Chief Executive Officer of Prime Loans.
Prime Loans believes that reforming the short-term credit framework is particularly important at a time when government’s own finances are under pressure. National Treasury’s 2026 Budget Review projects that debt-service costs will consume 20.8% of government revenue this financial year, leaving limited fiscal space to provide additional relief to financially strained households.
“When government’s own fiscal space is this constrained, ensuring that consumers can access safe, regulated credit becomes even more important,” Morgan said. “But that only works if the rules governing short-term lending are still fit for purpose.”
The pricing rules governing the sector have not been substantially revised since 2015. Over that period, inflation, compliance costs and operational expenses have risen sharply, while the caps on interest rates, initiation fees and service charges have remained largely unchanged.
“In essence, a framework built for 2015 is increasingly being asked to do a 2026 job.” said Morgan. This has placed growing pressure on regulated short-term lenders, limiting their ability to serve higher-risk consumers sustainably and potentially contributing to more applications being declined.
The danger, Prime Loans warns, is that consumers excluded from the regulated credit market may turn to illegal lenders who offer none of the protections provided under the National Credit Act.
South Africa has an estimated 40,000 illegal lenders, many of whom target financially vulnerable consumers with promises of quick and easy access to money.
Lenders operating outside the National Credit Act are not subject to its requirements on affordability assessments, pricing disclosure and consumer protection. Borrowers can face exorbitant interest rates, intimidation and coercive debt collection practices, including the unlawful seizure of bank cards, identity documents and other personal belongings.
Prime Loans supports the work already under way through the Credit Association of South Africa (CASA), which has been engaging with the National Credit Regulator, the Department of Trade, Industry and Competition (DTIC) and National Treasury on proposals to modernise the pricing framework.
With the MTBPS approaching, Prime Loans is calling on Minister Gdongwana to affirm government’s commitment to reform and accelerate work on four priorities:
· Modernising the short-term credit pricing framework, including caps on interest rates, initiation fees and service charges, to better reflect current inflation, compliance and operating costs;
· Strengthening enforcement against illegal lenders operating outside the National Credit Act, supported by adequate resources;
· Expanding access to safe, regulated credit for financially underserved consumers, while maintaining responsible lending and affordability requirements; and
· Improving consumer education and financial literacy, particularly around credit, debt review and responsible borrowing.
“South Africa cannot close the gap between the demand for credit and access to it by maintaining the status quo,” Morgan said. “We need to see a signal that government understands reform is a priority and will take steps towards a framework that reflects today’s economic realities. Protecting consumers and expanding access to credit should not be seen as competing goals. We need to do both.”