Business Report has an article highlighting the tougher credit policies introdcued by the biggest small loans provider, African Bank, which has had an impact on the bank’s earnings.

“Revenue slipped to R1.429 billion in the three months through June, from R1.432 billion in the comparable period for the year before, African Bank said in a statement to the Johannesburg Stock Exchange on Monday. The slowdown trimmed sales growth for the first nine months of its fiscal year to 16 percent, after rising 26 percent in the first two quarters.

African Bank last year changed the way it prices loans to give clients who pay on time access to cheaper credit and larger sums, which may generate higher revenue over time. In the third-quarter, African Bank imposed tougher credit terms on high-risk customers as inflation accelerated and interest rates rose from a 25-year low.

“This has had the effect of tightening the affordability criteria for these clients and thereby reducing loan sizes and terms,” African bank said.”

“Loans granted by African Bank and not paid for more than three months worsened to 27.2 percent of total credit extended in the third quarter from 25.4 percent in the year-earlier period, African Bank said. Provisions for bad loans rose 28 percent to R1.3 billion from R979 million. Total loans granted by African Bank rose 18 percent to R7.3 billion.”

The bank has stated that “The group has deliberately positioned itself so as to anticipate a more challenging trading environment.”

The “more challenging trading environment” probably being an up turn in interest rates and the possible over extension of consumer credit in the country coupled with the introduction of the National Credit Act which will hit small loans providers that have been taking advantage of the Exemption Notice to the Usuary Act which will fall away in June 2007 and also sanction creditor providers who grant credit recklessly.