1. Presentation to the Portfolio Committee
March 2017

2. Facilitate access to responsible, affordable
finance for the emerging market’s poor,
by mitigating credit risk for finance
providers and providing a
sustainable solution
to all stakeholders

3. Agenda Introduction What do we propose? The solution
What are the benefits
What are we proposing?
Conclusion

4. Introduction Some of the challenges in the market…
High cost of credit –
Lack of effective competition, high overhead costs
Exorbitant cost in the creation, perfection and enforcement of collateral
Lack of alternative sources for non bank funding
Collection risk
Increasing private sector credit and mortgage finance
Transparency and efficiency in the Financial Services sector

5. Introduction Drive for financial inclusion reflects:
Economic transformation needs
Asymmetric information dissemination (adverse selection and moral hazard)
Market access for new and Black owned players
Co-operative
Black insurance industry
A platform to regulate the often conflicting demands of the above challenges
• Define the company/business in a single declarative sentence

6. Introduction High cost of credit reflects: Over-indebtedness reflects:
Low collection rates – Collection risk
Lack of consumer credit visibility
Over-indebtedness reflects:
High cost of credit (interest rates and ancillary lending costs)
Lack of affordability testing and monitoring
• Define the company/business in a single declarative sentence

7. The challenge for regulators
Developing effective mechanisms to execute on its mandate
Prevention implies early detection of inappropriate behaviour and addressing it immediately
• Define the company/business in a single declarative sentence

8. Deepening Financial Inclusion
• Define the company/business in a single declarative sentence

9. What do we propose? A National Deduction Management Service that is…
RULE BASED
SECURE
COST EFFECTIVE
RELIABLE
ONLINE
WEB based
With AUDIT / RECORD TRAIL
Independent, impartial and secure

10. Payroll How does it work?
What are the challenges in a non regulated environment…
Banks
Payroll
Lenders
Insurance
Unions
Other

11. How does it work? Banks Payroll Account Lenders Insurance
Only Valid deductions go onto payroll R U L E R U L E
Insurance R U L E R U L E
Employer/Regulator makes the rules
Unions R U L E
Tool applies the rules
Other
Information supplied to be able to apply rules
Employee Information, Available Salary, other

12. How does it work? A market that is asymmetrical and inefficient… Banks
Free-for-all market
Moral hazard
Low admin capability
Employers
Payrolls
Lenders
Low collect-ability
No related products & services
Often illegal deductions
Insurance
Employees
Subject to:
Over-borrowing, Exploitative interest rates,
Aggressive loan collection practices
Mortgages
High lending costs
High transaction costs
Little info re affordability
Other
Lack of Financial Infrastructure

13. How will it work? Impact of a national deduction management platform…
PSI applies and monitors rules
System
Regulator sets the rules
Banks R I S K M T G A O N R U L E
Orderly Credit Market
Orderly Admin
Employer
Payrolls
Lenders R U L E
Level Playing Field
Only Valid Deductions
Insurance
Employees
Affordable borrowing,
Market-related interest rates,
Automated loan collection practices R U L E
Mortgage
Sound Lending Practices
Manage-ment Info R U L E
Other
Affordability, indebtedness etc.
Info interface
Employee info, available salary etc.

14. Benefits What does this mean for the economy…
Increases level of Financial Inclusion and Financial deepening
Contributes to increased economic activity – a key driver of GDP growth
Drives the take up of other financial services products
Reduces poverty – through acquisition of assests
Contributes to financial, economic and social stability
Inculcates a culture of responsibility to get people to pay debts
Provides a platform to improved Employee Financial Wellness

15. Benefits What does this mean for the regulator…
A live monitoring and measurement tool
A tool that registers and monitor all lenders in the market
Actively regulate and intervene in the market
Drive information symmetry
Drive competition in the credit lending market
Track and monitor borrower and lenders in the market
A tool that help drive financial inclusion

16. Benefits What does this mean for the employer…
Reduces the cost and administrative burden of handling deductions
Ensure that the employer complies to prescribed minimum take home
Help reduce level of employee over-indebtedness
An efficient and accurate processing of deductions
Allocate resources to core business activities and functions
Employer does not have to deal with multiple 3rd Party Code Holders

17. Conclusion The key benefits…
Makes financial services accessible and cost effective
Will help deepen Financial Inclusion in the country.
Increase the access to affordable financial services products
Addresses the requirements and needs of all stakeholders
Policy, Oversight, Regulatory, Reporting
Contributes to financial, economic and social stability
Encourage a seamless entry of new players in the market.