Market overview: South Africa’s growing alternative finance sector

South Africa’s on track to becoming an innovative fintech hub, and the alternative lending market is growing as a result1. By leveraging data and technology, alternative lending is not only becoming more accessible but it’s being seen as a solution for creating better financial inclusion. As we will soon be introducing new lending companies from this country, we’ve provided you with some insights into the South African economy and its alternative lending market.

Welcome to South Africa

With more than 61 million people, South Africa (officially the Republic of South Africa) is one of the largest, most diverse countries in Africa, with 11 official languages and multiple religions and ethnicities. It’s well-known for its beautiful scenery, wildlife, bustling city life, and unique coastlines.

South Africa’s categorized as an emerging market because of its developing economy with huge growth potential. With an abundant supply of natural resources, it’s the world’s largest producer of platinum, gold, and chromium2.

South Africa economy facts*

  • Population 61.5 million3
  • Unemployment rate 28.53%2
  • Average monthly take-home pay R 12 9584 (Approx. USD 900)
  • Fitch rating BB-5
  • GDP USD 21 billion3
  • GDP per capita USD 7 080 (Current, April 2021)3
  • Government type Parliamentary republic
  • Main industries Mining, automobile assembly, metalworking, machinery, textiles, iron and steel, chemicals, fertilizer, foodstuffs, and commercial ship repair2
  • Main export goods Gold, platinum, cars, iron products, coal, manganese, and diamonds2
*Statistics as of January 2022

The fast-growing need for alternative lending

Historically, financial inclusion in South Africa has been a challenge, and today, 31% of the country’s population still don’t have access to financial services, such as bank accounts or loans6.

Up until recently, the banking sector has been controlled by 4 major banks which own and control more than 80% of the banking sector’s total assets7. These banks are very cautious and aren’t willing to take on much risk or deal with smaller deposits and loans8. Therefore, when it comes to traditional bank lending, a lot of small to medium businesses and retail customers are locked out because of strict lending criteria. As a result, almost a third of the South African population has unmet credit needs9.

Alternative lenders are creating better, more inclusive credit assessments

The gap in the lending market left by traditional banks has created a significant opportunity for alternative lenders to offer their services to the under-served population – whether it be business, mortgage, car, or personal loans. This segment of the market is mostly low-income, but 89% have mobile phones (39% of which are smartphones)8, which means a large part of this group have the ability to access online financial services.

To ensure borrowers are eligible for lending, alternative lenders are leveraging data and technology to create more detailed customer profiles (compared to traditional banks)10. Through this, they’re able to make better credit decisions and effectively manage risk10.

These technology-driven credit assessments are now improving financial inclusion in South Africa – providing loans to people and businesses who would otherwise be excluded from the banking system10. And as alternative lenders continue to emerge, the traditional banks’ hold on the lending market is becoming less dominant11.

The rise of the fintech sector

Venture capital (VC) investment has been increasing every year, as fintechs continue to make online financial services lower-cost and more accessible. In 2021, African fintechs received around USD 168 million in VC investment across 44 seed and pre-seed funding rounds (compared to USD 44 million the year before)12.

Some of these start-ups are now considered world-class, making it to the Fintech 1006 – a globally ranked list that identifies fintech companies at the forefront of innovation. For example, Riby, a South African platform that helps the underbanked part of the population access financial services such as savings accounts and loans, reached a significant milestone by making it to the Fintech 100.

In response to South Africa being put in the global spotlight, the South Africa Reserve Bank established a fintech innovation hub to support the ongoing development of the industry13.

Other efforts to protect the unbanked population

In 2005, South Africa introduced the National Credit Act (NCA). Before this, the lending market was largely unregulated, which meant borrowers weren’t protected against discrimination from traditional banks and other lenders14. So the act has been beneficial in regulating the country’s lending market.

The NCA promotes a non-discriminatory marketplace for loans and aims to increase the accessibility of credit for everyone14. For low-income earners especially, it ensures lending terms are fair and easy to understand15.

South Africa’s economy during the pandemic

The South African economy faced many challenges during the Covid-19 pandemic, such as increasing unemployment, domestic currency risk, and reduced access to financial services16. However, its GDP growth rate has now significantly improved from -7% in 2020 to 5% in 20213.

To help South Africa get back on its feet, it received USD 4.3 billion of funding from the IMF to create more jobs and unlock economic growth. In addition, South Africa began lowering entry barriers in the market, making it easier for businesses to start, grow, and compete with each other17.

Lenders response to the pandemic

Even before the Covid-19 pandemic, the traditional banking sector didn’t take many risks, and because of this, it withstood the pandemic’s effects pretty well18. So for them, it was mostly business as usual. However, for alternative lenders, after a long period of growth, loan volumes dropped during the initial pandemic period. This was due to a combination of lockdown restrictions not enabling customers to make physical applications in-store, and lenders becoming more cautious of higher-risk borrowers4.

Now, the consumer credit index in South Africa continues to improve along with the financial stress caused by the pandemic – driven by the stabilization of distressed borrowers and lower number of new defaults19.

Closing thoughts

Although South Africa faces its fair share of economic challenges, its fintech and alternative lending sectors are poised for growth. And as traditional banks continue to tighten lending criteria, we expect there to be an increase in loan investment opportunities as alternative lenders continue to provide loans to those unfairly locked out of the traditional lending market. For investors, it can be a great opportunity to support financial inclusion in South Africa.

In the future, we’d like to onboard more South African lenders on Mintos. We hope you found this market overview relevant for your investing experience on Mintos. If you have any feedback, feel free to share your thoughts in the Mintos Community.


This is a marketing communication and in no way should be viewed as investment research, advice, or recommendation to invest. There is no guarantee to get back the invested amount. Past performance of financial instruments does not guarantee future returns. Investing in financial instruments involves risk; before investing, consider your knowledge, experience, financial situation, and investment objectives.


  1. Statista (2022) Alternative Lending – South Africa | Statista Market Forecast
  2. CIA (2022) The World Factbook: South Africa
  3. IMF (2022) Countries: South Africa
  4. Business Tech South Africa (2021) This is the average personal loan amount in South Africa right now as banks tighten up
  5. Fitch Ratings (2021) Fitch revises South Africa outlook to stable, affirms at BB-
  6. Intergovernmental Fintech Working Group (2019) Fintech Scoping in South Africa
  7. Louis, L. & Chartier, F. (2017) Financial inclusion in South Africa: An integrated framework for financial inclusion of vulnerable communities in South Africa’s regulatory system reform, Journal of Comparative Urban Law and Policy 1(1), 13.
  8. Oxford Business Group (Accessed 2022) South African banks making efforts to reach and integrate the unbanked population
  9. Lavagna-Slater, S. S. (2017) The University of Pretoria, Investigating peer-to-peer lending as a solution to unsecured lending in an unbalanced credit market
  10. Intergovernmental Fintech Working Group (2020) Non-traditional data research report
  11. PWC South Africa (2017) The future of banking: A South African perspective
  12. Baobab Insights (2021) Southern Africa venture capital seed-stage market map
  13. The Fintech Times (2020) Overview of fintech in Africa in 2020 and predictions for 2021
  14. (Accessed 2022) Introduction The National Credit Act (the Act) came into operation at a time where consumer laws were somewhat unheard of in
  15. org South Africa (Accessed 2022) National Credit Act
  16. Baobab Insights (2021) South Africa FinTech Market Map 2021
  17. International Monetary Fund (2020) South Africa Looks Toward Inclusive Recovery to Stabilize Debt, Boost Growth
  18. Fitch Ratings (2021) Fitch Affirms South Africa at ‘BB-‘; Outlook Negative
  19. Transunion South Africa (2021) Q3 2021 – SA Consumer Credit Index


Have something to share?

Ask questions, share your thoughts, and discuss with other investors in our Community.