Youth Month provides a moment to reflect on how young South Africans are participating in the economy they are inheriting. But data from consumer credit reporting company, Experian, shows that in one key area –access to credit – many are increasingly being left out.
And the figures included in Experian’s latest Consumer Default Index show the scale of this exclusion. People aged 20 to 29 make up almost a quarter of the country’s adult population yet hold only 10% of active credit accounts and account for just 4% of the R2.39-trillion in outstanding consumer debt. They are described as “credit invisibles”, young consumers with little to no footprint in the formal credit system.
The data also reveals that the youth default rate eased from 7.21% in March 2025 to 5.79% a year later. Lower defaults would normally signal a healthier consumer base. But report cautions against that reading, and it is worth understanding why.
As Experian explains, the decline reflects lenders pulling back rather than young people managing debt better. With youth unemployment above 40%, credit providers have tightened their criteria, and fewer young applicants are being approved. Default rates fall not because borrowers are coping, but because the riskier applicants never received approval. As the bureau put it, a lower default rate is a hollow victory if young people are being left out of the financial system altogether.
This matters well beyond Youth Month. Credit is not only a way to spend; for many it is how a financial identity is built. A young person who cannot access a small, regulated credit product has no way to demonstrate that they can borrow and repay responsibly. Without that track record, the larger milestones that depend on it – a vehicle to get to work, and eventually a home – move further out of reach.
The data shows this clearly. Where young people do hold credit, it is concentrated in vehicle finance and retail accounts, while home loans make up just 1% of their credit exposure. This is a generation largely shut out of the asset-building forms of debt that previous generations used to establish themselves.
None of this happens in a vacuum. The formal short-term lending sector, which is often where younger and first-time borrowers make their entry into regulated credit, is under real strain. The regulatory framework governing short-term credit has not been meaningfully updated since 2015. Over that decade, inflation, compliance costs and operational costs have climbed steadily, while the caps on interest rates and fees have stayed largely unchanged.
The result is a more risk-averse formal market. When the economics of responsible lending become harder to sustain, lenders tighten, and the applicants most likely to be turned away are those with thin credit files and uncertain incomes – young people.
But here is the part that should worry us most: when formal, regulated credit becomes harder to access, demand does not disappear. It simply moves.
Young people shut out of the regulated market do not stop needing money to cover transport, study costs or unexpected expenses. Many are pushed toward unregulated and illegal lenders, loan sharks, who operate entirely outside the law. These operators charge exorbitant rates, offer no transparency, and in some cases use coercive collection methods. For a first-time borrower with no experience of how credit works, that is a dangerous place to begin.
So, what should be done? The answer Experian offers is the right one. The industry must not simply open the credit taps. Rather, we must ensure young South Africans get responsible, sustainable access that lets them build a credit profile over time.
That requires movement on a few fronts at once. The regulatory framework needs balanced modernisation – protecting consumers while keeping formal, responsible lending viable, so that lenders can extend credit to thin-file borrowers without operating at a loss. Industry bodies such as the Credit Association of South Africa (CASA) have already engaged regulators and policymakers on exactly this point.
Enforcement against illegal lenders must run alongside that reform, because a healthier formal market is the most effective barrier to the informal one. And, critically for this age group, consumer education must keep pace. A young person engaging with credit for the first time needs to know how to verify that a lender is registered with the National Credit Regulator (NCR), how to read the full cost of a loan before signing, and that there is no legal obligation to repay an unregistered lender. As Experian noted, teaching young South Africans to manage credit from the outset is key to long-term economic resilience.
Used responsibly, regulated credit is not a trap. It is a tool that helps people manage short-term pressure and, over time, build the financial standing that fuller economic participation depends on.
Youth Month asks us to think about the future these young South Africans are stepping into. A credit system that quietly excludes a quarter of the adult population is not protecting them. It is leaving them invisible and pushing some toward the very operators they most need protection from.
Written by Nita Morgan, Director of Prime Loans