Capitec redefining lending in SA

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SIMON BROWN: I’m chatting now with Wiehahn Koch, head of Purpose Lending at Capitec. Wiehahn, appreciate the time today. When we think about lending, when we think about debt, what often comes to someone’s mind is that debt is bad, debt is risk. Those can be true statements, but they needn’t be true; debt can actually be good, can have a purpose.

WIEHAHN KOCH: Simon, thanks for having me and it’s a pleasure speaking to you. I agree fully. What we do at Capitec is we’ve taken to ‘purpose lending’. We believe that purpose-led credit really changes the thinking away from what we often term ‘consumption lending’.

We believe if you, with the right mechanism, connect a credit product to a client with a clear life goal or life moment, as we call it – whether that be mobility, home improvements, education or even growing a business – the bottom line, when it’s tied to something productive, is it’s rather a financial tool than a burden.

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SIMON BROWN: Absolutely. Some of those things, like education – obviously you come out smarter at the other end. It improves your job prospects; it improves your salary prospects. But even with just a loan for a vehicle, fundamentally that mobility can be good for an individual at home. These are simple things, perhaps, but can be life-changing in the right hands.

WIEHAHN KOCH: That’s correct, Simon. So if we take the one example of mobility, mobility far outreaches the normal traditional thinking of having a ‘vehicle finance’ product.

Let me explain … We’ve seen with purpose lending it is more accessible to more clients, meaning that these clients can get mobility or access to mobility, which all of a sudden leads to better job prospects because I can drive to my new job rather than commuting. It makes me more reliable. It increases my time spent either at work or with family obligations. Therefore the client’s whole life fundamentally changes due to being afforded the opportunity to have increased mobility.

You mentioned education. We know that an individual in this country studying towards something has greater ‘earnability’, as we call it, or prospects for better earnability in future…

But at least it’s also someone who shows responsibility and wants to grow in life. And naturally that leads to either higher income or, at least in the economy currently, a sustained income, which makes them economically active and retains their economic status.

So it’s definitely created for those reasons and it’s starting to make all the right noises to not be seen as an over-indebted, financially exclusive thing but rather one that says, if I look into the future, purpose lending connected to a life moment is really something that can propel me forward.

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SIMON BROWN: This then kind of takes the entire sort of lending model and I suspect shakes it, because the old school way would be quite simple. I would arrive with a payslip, three months of bank statements and proof of residence for Fica. That would be the process.

There’s a lot more to it these days, of course. There are a lot of informal economies. There’s a lot of side hustles and gig economies which need to be taken into account as well. And that whole process needs to shift.

WIEHAHN KOCH: Yes, that’s correct. What we’ve learned from clients, specifically in the South African context, is that just a fixed monthly payslip and salary is no longer the norm. We do see various forms of income coming into clients’ accounts which are not accounted for when they are applying for credit traditionally.

If you look at the traditional approach, it excludes income that comes either regularly or irregularly, but is still income that has inflows into this client’s account that are being ignored and for that reason are not being taken into account towards something more meaningful in their life to obviously take them forward.

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SIMON BROWN: I imagine my sense of Capitec is very much a digital-first bank. You have a lot of this information. You have a really good understanding of clients. That, I would imagine, extends beyond just flowing into it but how the apps are utilised, how the different products within the suite are utilised as well.

WIEHAHN KOCH: That’s correct. We are fortunate to have a large client base of 25 million South Africans, and we have a host of data that we can leverage to better understand the client’s financial position – not just from the inflows, as we mentioned from an income perspective, but also the outflows, how regularly that happens, how the client transacts.

That shows us a lot of the behaviour and instincts that could very much benefit the client.

In a typical assessment you would historically look at a client’s income versus expenses and arrive at some sort of affordability, whereas we now have a much wider view of this client. Seeing a client more holistically creates opportunities for us to ensure we give the client the right product, not only [for the] right industry or for the right purpose, but also at the right time, [while] understanding when clients have increased income or when they’ve decreased income, to make sure that we don’t only lend to clients, but we do so in a very responsible manner.

SIMON BROWN: Yes, fit for purpose. Very much so. Head of purpose lending at Capitec Wiehahn Koch, I appreciate the time.

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