“Of 19 million credit-active consumers in South Africa, 50% had impaired credit records, three months plus in arrears,” Western Cape provincial manager Karam Singh said in Johannesburg.

“Fifteen percent are described as debt stressed, one to two months in arrears.”

As a result, more than 11 million of South Africa’s credit active consumers were described as over-indebted.

This high level of indebtedness was compounded by South Africa’s low level of savings.

He was addressing an SAHRC discussion on business, human rights and the implications of micro-lending on access to justice.

Historically in South Africa, the poor has been unable to get loans since they had no assets as security.

“For persons living in poverty, loans were not available as a means of lifting oneself out of the confines of poverty,” Singh said.

Micro-lending had since enabled the poor to access cash.

“What we are seeing in South Africa and other parts of the world, even in the US and UK, is that these [micro] loans are being used for consumption,” Singh said.

“From 2007 to 2012 in South Africa we saw outstanding unsecured credit increase from R41 billion to R159 billion, a growth of 60%.”

With a faltering economy, cash-strapped consumers were struggling to pay back loans, and getting trapped in a poverty cycle and debt trap.

“In 2009, studies show that 40% of the money from micro finance was used to buy food, and many borrowers were taking new loans to pay [old] ones,” he said.

Unsecured lending and micro-loan schemes were identified as major problems that plagued Marikana during the labour unrest in August 2012.