THE CONCEPT OF CREDIT IN THE MODERN MONETARY ECONOMY

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CHAPTER 3 CREDIT PROVISIONING: A SOUTH AFRICAN PERSPECTIVE

INTRODUCTION

The previous chapter outlined the nature and role of credit in a modern monetary economy. Topics that may influence private providers of asset-backed credit in South Africa were highlighted. This chapter provides a South African perspective on credit provisioning in order to provide insight into the direct environment in which private providers of asset-backed finance operate. Risk events in recent history forced the financial sector to exert more stringent regulations for credit provision by banks, creating a market for private providers of asset-backed finance. The international origins of these trends include the credit crisis, which erupted in the United States and spread globally in 2007–2008, as well as the closing down of Barings Bank due to excessive risk-taking by an official acting on his own, both discussed in Chapter 2). The resulting regulatory developments are reflected in the South African financial sector, and are discussed in this chapter.
This chapter starts with a brief history of the credit industry in South Africa, which is followed by a comprehensive outlay of the regulations of the domestic credit industry. Regulations fundamentally determine the operation of private credit providers and formed a crucial part of this study. The next section deals with a description of the contemporary credit industry in South Africa, including service delivery by banks. The primary purpose of this chapter is to provide a secure knowledge base on the institutional backing for credit management that could provide a secure platform for the potential and practicing private credit provider. As such, the next section provides a background to the credit industry in South Africa.

 

THE CREDIT INDUSTRY IN SOUTH AFRICA
In this section, the South African credit industry is discussed in terms of historical development, financial regulations that refer to regulatory legislation, and institutions as well as the primary role players in the domestic credit industry.

History of banking in South Africa

South Africa and the United Kingdom are the only countries with a modern banking sector, which had not experienced a collapse of their banking systems during the twentieth century (Jones, 1996, pp. 263–271). An overview of the banking history of South Africa explains this remarkable achievement, and is divided as follows: the periods of origins until 1921; the foundation of the SARB in 1921; the period until 1942 when banking legislation was fundamentally revised; and the period between 1942 and 1990 when the next revision occurred.

Founding and development until 1921

As indicated in Chapter 2, a formal credit arrangement depends on the existence of a monetary economy. As such, the banking industry in South Africa emerged as part of the commercial economy, which is illustrated by the timeline in Table 3.1 below.
According to De Villiers (2012, pp. 40-44) early commercial development in South Africa (or a lack thereof) can only be understood by referring to the policies of the Vereenigde Oost-Indische Compagnie (United East Indian Company, usually abbreviated as VOC), which was founded in 1602 and based in Amsterdam. This was the first truly globalised company in history, which sourced commodities in the Orient and traded in Europe. The Dutch Republic granted it a charter to enter into agreements, and founded settlements wherever needed for its commercial ventures. The settlement at Table Bay, named the Cape of Good Hope and founded in 1652, was conceived as an outpost with the single function of providing food and fresh water for ships sailing between Europe and the Orient. The supreme authority of this new colony was not the Dutch government, but the board of directors of the VOC. This body soon regarded the Cape as an unavoidable drain on their funds, and expended no more than the minimum attention and funds on it. This myopic approach led to outsourcing of food production to the newly created class of Vryburgers (free burghers) in 1657, a step which resembled abandonment, rather than emancipation. In addition, in a worldwide system where corruption was endemic, employees of the VOC entered into private trade with the company, excluding Vryburgers. The majority of Vryburgers moved into the African interior, where their distribution was only contained by the end of the nineteenth century. Their economy tended to self-sufficiency, with little need for banking services (De Villiers, 2012, pp. 40-44). Towards the end of VOC rule, it established the Lombaard Bank in 1793, which was fully owned by the government, but had commercial objectives (Rossouw, 2009, p.1).
With the British takeover of the Cape Colony in 1795 (which became permanent in 1815), private ownership and the right to trade with visiting ships were guaranteed. Agriculture developed an almost commercial approach with the arrival of the 1820 British Settlers. During these years, shop owners provided consumer goods, but also acted as import–export agents and providers of credit (Verhoef, 2012a, pp. 204–205).
The emergence of a commercial economy slowly led to a need for financial services. Therefore, small banks were established, such as the Cape of Good Hope Savings Bank in 1831, the Eastern Province Bank in 1838 in Grahamstown and the Port Elizabeth Bank in 1847. During this era, 25 local banks were also established, but with the depression which followed late in the 1860s, many did not survive. However, the interest of British banks was aroused by rising wool exports from the Cape Colony since the 1840s, but the state of the economy and politics in Europe prevented these banks from investing before the 1860s. The first European bank to open its doors in South Africa was the London and South Africa Bank (LSAB) in 1861, then the Standard Bank in 1862, and finally the Oriental Bank Corporation in 1873. The depression of the 1860s led to most of the small local banks to be taken over by either LSAB or Standard Bank (Jones, 1996, pp. 17–18; Verhoef, 2012a, pp. 205–206).
Until 1856, the territory of Natal was regarded as part of the Cape Colony, but with little commercial activity. English-speaking farmers gradually moved into Natal with the express purpose of producing commodities, for instance sugar, maize and cotton, for British industries. One result was the founding of the Natal Bank in 1854, with branches of the Standard Bank and LSAB following in the 1860s (Verhoef, 2012a, pp. 208–210).
Economic growth in the Free State was slow, but exports of wool and leather slowly created a monetary economy. In 1862, the first two banks were founded, namely the Bank of Bloemfontein and the Bank of Fauresmith. The Standard Bank and LSAB also opened branches, but conflict with government led to a prohibition on all foreign banks (Verhoef, 2012a, pp. 212–213). Nevertheless, the Oriental Bank and another colonial bank, the Bank of Africa, were allowed (Jones, 1996, p. 27).
Before the mineral revolution, there was no competition in Transvaal for the branch of the Standard Bank founded in Pretoria in 1877. This was not the result of constrained competition, but of the lack of commercial activity (Jones, 1996, p. 27).
Jones concedes that the early imperial banks mobilised latent capital, but maintains that bank advances were, as elsewhere, the most important source of deposits. The levels of investment created by the world-wide economic recovery of the late 1860s enabled Britain to export capital and knowledge. Imperial banks introduced banks to South Africa with large capital bases, branch banking, regular payment of interest on deposits, skilled management and effective hierarchical management, which enabled the head office in London to control affairs in South Africa (Jones, 1996, pp. 3–4, 12– 13, 20).
The principles according to which imperial banks conducted business in Southern Africa were:
no lending on accommodation bills; no lending against real estate;
note issuing to be undertaken with caution; no unsecured overdrafts; and
no exchange speculation.
In time, however, lending against real estate was undertaken (Jones, 1996, pp. 11-12).
This section indicated how the foundations for a modern banking industry in South Africa were laid, while the economy was still relatively undeveloped. The next section describes the fundamental changes to banking, following the discovery of diamonds and gold, in 1867 and 1886 respectively.

Banking and the mineral revolution

With the discovery of minerals (diamonds in 1867 and gold in 1886), South African rural economy based on barter, was transformed within a few decades into a modern market economy with credit markets (Verhoef, 2012a, p. 203). The result was not only a steep rise in exports (£600 000 pounds in 1850 to £7.6 million in 1900) but it also created a domestic market for agricultural produce (Verhoef, 2012a, p. 205).
At the beginning, digging of diamonds seemed like a gamble. The distribution and nature of diamond-laden ore were still unknown. Instant riches and months’ work with no findings were all part of the reality. Banks extended credit easily, and the inevitable banking crisis occurred in 1881. Concurrently, there were several conflicts, leading to the most serious depression in the history of the Cape Colony to that date, from 1882 to 1886 (Verhoef, 2012a, pp. 207–208).
Discovery of gold in Transvaal7 in 1886 magnified the fundamental change to the South African economy. The colonies and republics of Southern Africa were integrated with the world economy, with its cycles of credit ‘booms’ and ‘busts’ (Verhoef, 2012a, pp. 214–215). The great distance of mining areas from existing coastal towns forced respective southern African governments to invest heavily in infrastructure. This created a platform upon which a commercial economy, including rudimentary manufacturing and domestic food production, could be built (Verhoef, 2012a, pp. 210– 211).
Discovery of gold did not lead to a multiplication of banks, as might have been expected, because it followed directly after an economic downturn and the failing of many banks. Furthermore, gold mining in South Africa was (and still is) very capital-intensive. The banking sector, in fact, was consolidated (Jones, 1996, pp. 17–18). The capital-intensive nature of the country’s deep level mining resulted in South African banks traditionally being well capitalised. This created a platform for successful international expansion when the opportunity arose (Singleton & Verhoef, 2010, p. 541).
One new entrant was the National Bank, created for political reasons (see Jones, 1996). Although the head office was in the South African Republic, its investors were mostly British or British South African (Jones, 1996, pp. 17–18).
Competition was not restricted in the South African banking sector. The character of the local economy, however, led to concentration of the banking sector. During the course of history of the Cape Colony, 19 local banks had been taken over by other banks and 14 had been liquidated. In both Natal and the Free State, only one local bank had survived its first years, which was also eventually taken over. In Transvaal, no banks existed before the entrance of the Standard Bank in 1877, which has been operating in the Cape Colony since 1862. The state supported the newly formed National Bank after its founding, but did not restrict its competitors (Jones, 1996, pp. 23–27).
The era of the mining revolution in South Africa was further characterised by competition for political dominance of the sub-continent. The economic dominance of the relatively well-developed British-ruled Cape Colony was replaced by the South African Republic, with its newly exploited gold reserves. The explosive potential of this situation erupted with the Anglo Boer War of 1899–1902, which brought all South African territories under British rule. When the economy had recovered by 1906 (Verhoef, 2012a, p. 208), banking was conducted in a new environment: an all-British South Africa. This is the topic of the next section.

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A central bank for an all-British South Africa

After the Anglo Boer War, the British High Commissioner in South Africa, Lord Alfred Milner, was resolute to rebuild the area into an economic and cultural beacon. Political unification was preceded by a Customs Union in 1908. This Union formalised the emerging economic unity of all the territories (Verhoef, 2012b, p. 217). Like other industries, banking moved towards uniformity across South Africa, which became a political union in 1910, in turn leading to the formation of the SARB in 1921, which introduced a new era to South African banking.
Political reality after the conquest of the two republics prompted National Bank to compete actively against Standard Bank in all four territories. This attempt, backed by the mining houses of the Witwatersrand, led to intense competition and little room for other banks (Jones, 1996, pp. 23–27). Shortly before unionisation of South Africa in 1910, National Bank paid a high price for both the National Bank of the Orange River Sovereignty and Natal Bank, the latter of which suffered under bad debts. In order to challenge Standard Bank for countrywide domination, National Bank acquired the Bank of Africa in 1914, with its substantial interests in the Cape Province. This expansion, which included a large percentage of illiquid assets, also came at a high price. Subsequently, National Bank pursued acquiring the other important colonial bank, African Bank Corporation. However, the capacity of National Bank for take-overs was exhausted, and Standard Bank acquired this bank in 1920 (Jones, 1996, pp. 31– 40).
As a result of increasing economic integration, several calls were made for a central bank in South Africa. The matter was first mentioned in 1879 by the Afrikaner Bond (a political party in the Cape Colony) (see Winch, 2014), and subsequently advocated by 90 the reverend SJ du Toit. Calls were also made that the formation of the Union of South Africa should coincide with the formation of a central bank. This did not happen then, but the economic downturn following World War I made it clear that a central bank would play a constructive role in stabilising the economy (Rossouw, 2009, p. 1).
Rossouw (2009, p. 2) relates that during World War I, the South African currency was pegged to the British pound, which was pegged to the US dollar, which was set on the gold standard. After the war, the pound was separated from the dollar and depreciated against the American currency. It was therefore possible to redeem South African bank notes for gold, and sell it at a premium in London. In order to keep the required gold reserve, commercial banks had to purchase gold at this premium and therefore had to trade at a loss. A call on government to release them from this obligation followed, which led to a Gold Conference in Pretoria in October 1919 (Rossouw, 2009, p. 2). One of its resolutions was to request government to form a central bank with, amongst others, the authority to issue bank notes. A distinguished British banker, Sir Henry Strakosch, was employed to turn the recommendations made at this conference into practice. This led to a parliamentary act in 1920 to establish the SARB (Rossouw, 2009, p. 2).
The SARB opened its doors on 30 June 1921, as one of the earliest central banks in the world. The name ‘Reserve Bank’ was chosen in following of the Federal Reserve System of the United States, a tendency since followed by several other countries. The first banknotes were issued on 19 April 1922, and commercial banks were prohibited to issue their own notes from 30 June 1922 (Rossouw, 2009, p. 3). The heads of both De Nederlandsche Bank voor Zuid-Afrika and the Standard Bank in South Africa (Messrs HC Jorissen and JP Gibson respectively) were opposed to this important step. Nevertheless, Jorissen was appointed as first deputy governor of the Reserve Bank and Gibson was appointed to its board (Rossouw, 2009, p. 2).
A new era in South African banking followed. The newly formed Reserve Bank assumed a regulatory role in South Africa and laid one of several foundations for the country’s diversified economy, which is discussed in more detail in section 3.2.2.5. The next era is discussed in section 3.2.1.4.

South African banking 1921–1942

While the first two decades of the twentieth century had been taken up by political unification and World War I, the economic structure did not change fundamentally. Industrial development was promoted after the war and gained momentum with a change in government in 1924. By 1950, industry overtook mining to be the largest contributor to the South African gross national product (GNP) (Verhoef, 2012b, pp. 460–462). The present study delineated the transition between the formation of the SARB in 1921 and the implementation of a new Banking Act in 1942.
The first upheaval in South African banking after 1921 occurred in 1925. National Bank, after a phase of growth by expensive acquisitions, could not withstand the pressures resulting from the post-war economic downturn. A take-over of National Bank was facilitated by the Reserve Bank. Barclays in London formed the Barclays Dominion, Colonial and Overseas (Barclays DC&O) by merging De Nationale Bank of South Africa, the Colonial Bank of the West Indies and the Anglo Egyptian Bank (Singleton & Verhoef, 2010, p. 541).
During the same period, the legal framework changed from unlimited to limited liability for equity holders of banks. This led to an explosion of branches of colonial banks across the British Empire. Despite this relaxation, risk remained high, and strong centralised oversight was exercised in the two colonial banks, Barclays DC&O and Standard, which would dominate the local scene for decades to come (Jones, 1996, pp. 10–11).
A financial disaster could have followed if the largest South African bank, National Bank, could not be rescued. The basic weak point was local control, where managers could not refuse the influence of their own, sometimes reckless, directors. With the developments of 1926, English control and strict prudence became a characteristic of South African banking. The two dominating banks discreetly agreed on suitable rates, effectively forming a banking cartel (Jones, 1996, pp. 42–50).
While stability was attained, concentration of banks and the formation of a cartel led to a period of complacency and little innovation. A trade union for bank clerks, which was more concerned with employment conditions than customer service, gained power. University graduates were hardly ever employed, as knowledge and skills were transferred by way of apprenticeship-type in-house training. All taken into account, 92 however, the cartel might have been beneficial. When the international depression and drought claimed a large portion of the economy in 1933, intensely competing banks might have been unable to withstand the pressure (Jones, 1996, pp. 52–58).
In section 3.2.1.3, it was mentioned that returning to the gold standard was a central goal when establishing the SARB. This did not follow in a sustainable way. The gold standard was restored at pre-war rate on 18 May 1925, following the same step in the United Kingdom on 25 April 1925. After the Great Depression had descended upon the United States and the rest of the world in 1929, the United Kingdom abandoned the gold standard on 21 September 1931. In South Africa, however, it was retained. This led to massive speculative capital outflows, until government was forced to abandon the gold standard on 28 December 1932 and join the sterling area (British currency) in1933 (Rossouw, 2009, p. 3–4).
Ethnic empowerment of Afrikaners proved to be a powerful driver behind the creation of institutions for financial services. Important in this regard was the reverend John D Kestell (see Kestell, 1942). In analysing widespread poverty among Afrikaners, Kestell focused on external factors, as well as a loss of self-respect (Kestell, 1941, pp. 22– 31), workshyness (Kestell, 1941, pp. 33–38) and a reluctance to save. As much as saving souls, he laboured for saving of money with saving banks (Kestell, 1941, pp. 39-47). The main aim had to be to put people in a position of self-reliance, rather than ‘doing something FOR anybody’, which he believed would perpetuate personal poverty (Nienaber, 1946, pp. 105–117). As a result of his and others’ activism, Santam and Sanlam were founded in 1918, Volkskas in 1934 and Federale Volksbeleggings (FVB) in 1942 (Verhoef, 2012b, p. 464–465). Santam and Sanlam subsequently played important roles as respectively short- and long-term insurers, Volkskas as a commercial bank and FVB as an investment company.
From 1921 to 1942, several foundations for the development of a relatively diversified South African economy were laid, including a well-developed financial sector. In section 3.2.1.5, the era from 1942 to 1990 is discussed.

Banking for growth, followed by decline: 1942–1990

In political history, 1948 and 1994 are identified as major turning points in South African history. In banking, however, 1942 and 1990 are more significant dates. Modernisation in the economy, for which the foundations were laid in the period 1921– 1942, was reflected in the updated banking law of 1942 (see Verhoef, 2013). More recently, liberalisation of world trade manifested in a less restricted South African banking dispensation with new legislation in 1990. The relationship between economic and political transitions, however interesting, was beyond the scope of this study.
In this section, the development of the banking industry in South Africa is followed. Important in this narrative is strict monetary control, which gradually relaxed until 1990, with the adoption of the Banks Act (Act no. 94 of 1990), which still applied in 2017. The structure of a highly concentrated banking industry was nevertheless retained. Reference is also made to the evolution of banking institutions.
Comprehensive regulation of banks was first reached with the Banks Act, no. 38 of 1942. Bank institutions were classified according to their functions: commercial banks, deposit-taking institutions, people’s banks and loan banks (Verhoef, 2009, p. 163). Commercial banks had a disproportionate ability to create money by lending activities. They were therefore regulated more strictly, leading to a relative decline in their market share, to the benefit of building societies and ‘quasi banks’. To level out the playing field, a new law, the Banks Act, no. 23 of 1965, was accepted. Different deposit-taking institutions were classified, according to function, as commercial banks, merchant banks, hire purchase banks, discount houses, general banks and saving banks and another category of general institutions including trust and executor companies. These were regulated on an equal basis by the SARB. Commercial banks still dominated the scene, because of their superior money-creation capacities. Banks could not be owned by non-bank companies; only by other banks or bank-controlling companies. This led to commercial banks extending their activities through subsidiaries to all said possibilities. The Reserve Bank was particularly opposed to the potential merger of banks with insurance companies, as this could lead to enforced marketing and conducting business on less than optimal conditions (Verhoef, 2009, pp. 163–166).
The period between 1945 and 1971 was characterised by governments all over the world preferring financial stability and national interest to the possible efficiencies of 94 international free trade, resulting in no pure banking crises occurring during this time, as was also the case in South Africa (Singleton & Verhoef, 2010, p. 539).
Domestically, the dominance of imperial banks in South Africa was challenged by new, Afrikaner-controlled banks, Volkskas and Trust Bank. The nationalist government, which came into power in 1948, shifted its business, mainly to Volkskas. The imperial banks reacted by closing ranks and competing against the new banks where possible. The Netherlands Bank (Nedbank) responded pragmatically. In the long run, Trust Bank had been too competitive for its own capacity and in the 1970s headed for insolvency. Volkskas was more prudent, but nevertheless, by the 1970s the imperial banks had regained some of their losses (Jones, 1996, pp. 60–65). In comparison to the earlier history, Jones (1996, p. 42) contends that the close ties between Volkskas and the government, was a mirror image of the relations between National Bank and the Transvaal government half a century earlier. However, Volkskas’ prudency prevented it from ever being caught in an illiquid position. In that regard, Jones (1996, p. 42) identifies the Trust Bank as the later counterhalf of National Bank.
According to Verhoef (2009, p. 166) the South African government of the 1960s was resolute to curtail excessive creation of money through credit. Banks found ways around most restrictions, creating the so-called Register of Cooperation (Rocco) (see Verhoef, 2009) as one of many defensive strategies. Rocco was an agreement on fees and commissions between Standard Bank, Barclays and Nedbank. Volkskas was accepted as member in 1972, but Trust Bank preferred to stay outside. Although service levels declined, order and discipline were guaranteed in a potentially destructive small commercial bank market. Nedbank, as a small player, was on the one hand protected against unequal competition, but on the other hand not allowed to expand by imaginative innovation. Government was also confronted with two issues: monetary regulation relied on direct non-market measures, while government actually wanted the bank sector to work according to market forces (Verhoef, 2009, pp. 166– 172).
The global banking system entered a new phase in 1971. In that year, the Bretton-Woods era of fixed exchange rates collapsed due to different rates of inflation in different countries (King, 2016, p. 21). The result was less restrictive economic legislation, especially in Europe. Growth in European manufacturing led to savings as well as opportunities in other parts of the world. The channelling of savings from anywhere in the world to opportunities anywhere in the world created an increasing global flow of funds. To facilitate this, the Bank for International Settlements (BIS) (see Chapter 2) was created (Verhoef, 2009, pp. 159–163).
With political pressure mounting on South Africa since the late 1960s, concentration of South African banks, especially banks under foreign control, became an increasing risk. The prospect of a financial system controlled by hostile foreigners had to be avoided. Therefore, by the mid-1970s, banks were required to increase local equity to at least 50% (see Singleton & Verhoef, 2010). This was cast as law with the Financial Institutions Amendment Act, no. 101 of 1976, and led to the two imperial banks, Standard and Barclays (DC & O) to be listed on the Johannesburg Stock Exchange (JSE) (Verhoef, 2009, pp. 170–172). Nedbank incorporated in South Africa in 1951, and the majority of its shares were transferred to South Africans in 1973 (Singleton & Verhoef, 2010, p. 543).
Direct monetary controls were replaced in 1980 with market-oriented monetary policy. Interest rates, as a true reflection of the cost of borrowed money, played a central role in determining the value of the rand. In 1986, the SARB announced growth targets for a money supply aggregate as monetary policy framework. The targets were low profile and adjustable (Rossouw, 2009, p. 6).
Relaxation of monetary controls was the result of money supply and inflation, which kept rising, despite these controls. In 1978, the De Kock Commission (see Kantor, 1986) investigated an appropriate response. Reports of the De Kock Commission in 1979, 1982 and 1985 recommended relaxation of monetary control, in accordance with the international trend. This led to a fundamental shift in financial policy, embodied in the Financial Institutions Amendment Act, no. 106 of 1985, followed by the Deposit Taking Institutions Act, no. 94 of 1990. On the one hand, barriers between different kinds of financial institutions as created in 1965 were removed, as well as the ban on financial institutions from foreign countries to conduct business in South Africa (Verhoef, 2009, p. 178). Exchange rates were also deregulated, in order to be determined by market forces. On the other hand, capital requirements were increased, in line with the guidelines set by the Basel requirements for risk management. Foreign banks conducting business in South Africa had to obtain permission from the Registrar of Banks, or even the Minister of Finance, and had to adhere to the same prudency regulations as South African banks. Although competition increased, concentration remained, with the four main commercial banks still dominating the banking scene of the 1990s (Verhoef, 2009, pp. 173–180).
It would be misleading to view the said reforms as a purely rational process flowing from learned enquiry. In 1984, 44% of South Africa’s foreign debt was borrowed by South African banks and 16% by the public sector. Two thirds of this credit had to be repaid within less than a year. In 1985, American banks, led by Chase Manhattan, withdrew South African credit lines, causing banks to default on their loans. It was clear that fundamental reforms needed to follow (Singleton & Verhoef, 2010, pp. 545– 546).
Deregulation as a result of the legal reform of 1985 caused building societies to demutualise and render conventional banking services (Verhoef, 2009, pp. 180-181). However, they found it hard to compete and were absorbed by the major banking groups. Disinvestment from South Africa for political reasons in the 1980s led to the exit of British shareholding of Barclays and Standard Bank. Barclays received a new identity as First National Bank. Rand Merchant Bank unified their interests with First National Bank and created the First Rand Group. United and Allied Building Societies merged with Volkskas to form the Amalgamated Banks of South Africa, ABSA (or Absa). Soon afterwards, Bankorp, the heir of Trust Bank, became part of Absa. Nedbank’s position was enhanced by joining the Old Mutual group. The result of deregulation was intensified competition between banks, but it led to neither higher rates of efficiency nor a decline in concentration. However, each of these groups succeeded in expanding its business abroad. For a considerable time, liberalisation meant that South African banks acquired international assets and not that South African banks were victims of international expansion of other banks (Bresler, 2013, p. 30–31; Verhoef, 2009, pp. 180–197).
By the end of the era under consideration, South Africa had not yet been accepted back in international circles. The country had developed, nevertheless, a financial infrastructure, which soon enabled South Africa to be integrated into the global economy. In section 3.2.2, the current financial landscape is investigated in terms of regulation.

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TABLE OF CONTENTS
Contents
DECLARATION
ACKNOWLEDGEMENTS
TABLE OF CONTENTS
LIST OF TABLES
LIST OF FIGURES
ABBREVIATIONS AND ACRONYMS
SUMMARY
PART A: INTRODUCTION
CHAPTER 1 INTRODUCTION TO THE STRATEGIC POSITIONING OF INDEPENDENT CREDIT PROVIDERS
1.1 INTRODUCTION
1.2 THE CONCEPT OF ASSET-BACKED SHORT-TERM FINANCE
1.3 A STRUCTURED APPROACH
1.4 STRATEGIC POSITIONING
1.5 RESEARCH FOCUS
1.6 THE IMPORTANCE AND BENEFITS OF THE PROPOSED STUDY
1.7 LIMITATIONS, DELIMITATIONS AND ASSUMPTIONS
1.8 LITERATURE REVIEW
1.9 RESEARCH DESIGN, STRATEGY, DATA COLLECTION METHODS, DATA ANALYSIS AND RESEARCH ETHICS
1.10 SUMMARY
PART B: LITERATURE REVIEW
CHAPTER 2 THE CONCEPT OF CREDIT IN THE MODERN MONETARY ECONOMY
2.1 INTRODUCTION
2.2 THE PHENOMENON OF CREDIT
2.3 INFORMATION AND RISK IN CREDIT PROVISIONING
2.4 CONCLUSION
CHAPTER 3 CREDIT PROVISIONING: A SOUTH AFRICAN PERSPECTIVE
3.1 INTRODUCTION
3.2 THE CREDIT INDUSTRY IN SOUTH AFRICA
3.3 CREDIT MANAGEMENT IN SOUTH AFRICA
3.4 CONCLUSION
CHAPTER 4 ASSET-BACKED SHORT-TERM FINANCE AS A FINANCIAL INDUSTRY
4.1 INTRODUCTION
4.2 DEFINING ASSET-BACKED SHORT-TERM FINANCE
4.3 MARKET POSITION OF ASSET-BACKED SHORT-TERM FINANCE
4.4 THE ROLE OF COLLATERAL IN ASSET-BACKED FINANCE
4.5 REGULATORY REQUIREMENTS
4.6 TARGET MARKET
4.7 RISKS
4.8 CASE STUDY: AFRICAN DAWN: UNSUCCESSFUL PROVIDER
4.9 IMPLEMENTATION OF ASSET-BACKED SHORT-TERM FINANCE PROVISIONING
4.10 STRUCTURED APPROACH TO STRATEGIC POSITIONING OF ASSET-BACKED SHORT-TERM FINANCE
4.11 THE CONCEPT OF A STRUCTURED APPROACH TO STRATEGIC POSITIONING
4.12 CONCLUSION
CHAPTER 5 FRAMEWORK FOR THE IMPLEMENTATION OF ASSET-BACKED SHORT-TERM FINANCE
5.1 INTRODUCTION
5.2 ANALYSIS OF ENVIRONMENT
5.3 Value proposition: Market position
5.4 Profit proposition: Management of systems and processes
5.5 People proposition
5.6 Flow diagram for the life cycle of a loan: summary of Chapter 5
5.7 Conclusion
PART C EMPIRICAL RESEARCH
CHAPTER 6 RESEARCH METHODOLOGY
6.1 INTRODUCTION
6.2 RESEARCH DESIGN
6.3 SYSTEMATIC RESEARCH PROCESS
6.4 METHODOLOGIES EMPLOYED IN THIS STUDY
6.7 CONCLUSION
CHAPTER 7 EMPIRICAL RESULTS
7.1 INTRODUCTION
7.2 RESULTS OF THE SURVEY AMONG CUSTOMERS AND POTENTIAL CUSTOMERS OF ASSET-BACKED SHORT-TERM FINANCE
7.3 INSIGHTS DERIVED FROM THE SURVEY AMONG CUSTOMERS
7.4 RESULTS OF THE SURVEY AMONG PROVIDERS
7.5 INSIGHTS DERIVED FROM THE SURVEY AMONG PROVIDERS
7.6 CONTRIBUTION TO A STRUCTURED APPROACH AND STRATEGIC POSITIONING
7.7 CONCLUSION
PART D FINDINGS AND CONCLUSIONS
CHAPTER 8 CONCLUSIONS AND RECOMMENDATIONS
8.1 INTRODUCTION
8.2 RESEARCH AIM, OBJECTIVES AND HYPOTHESIS
8.3 LITERATURE FINDINGS REGARDING RESEARCH OBJECTIVES
8.4 EMPIRICAL FINDINGS REGARDING RESEARCH OBJECTIVES
8.5 A FRAMEWORK FOR ASSET-BACKED SHORT-TERM FINANCE
8.6 SWOT ANALYSIS FOR ASSET-BACKED SHORT-TERM FINANCE AS AN INDUSTRY
8.7 THE STRATEGIC POSITIONING OF ASSET-BACKED SHORT-TERM FINANCE
8.8 CONTRIBUTION TO THE BODY OF KNOWLEDGE REGARDING ASSET-BACKED SHORT TERM FINANCE
8.9 RECOMMENDATIONS RESULTING FROM THIS STUDY
8.10 POSSIBILITIES FOR FURTHER STUDY
8.11 CONCLUSION
REFERENCE LIST
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