58% of loans in arrears are held by women and here is why

by | Aug 18, 2022 | Personal Finance

The latest Eighty20’s Credit Bureau Data released in 2021 revealed that women make up 57% of the 19 million credit-active consumers in South Africa. Also, according to the report, 31% of credit-active women are in arrears vs 30% of men, while 58% of loans in arrears are held by women. As we commemorate women’s month, we unpack the burden of overwhelming debt amongst women as well as how women can navigate their finances through life’s big transitions, such as marriage, divorce, buying a home, and estate planning.

Globally, millions of people have re-examined their spending and started investing in long-term financial goals as a result of the pandemic. However, no one was immune to the financial devastation that the pandemic yielded.

As shelter is one of the most important human needs of our society, there is no better way to review this than through the financial behaviours of property tenants. Property Management Systems giant Payprop released their Market Report for the year 2021, and revealed that with high levels of inflation, rising costs of living, and a slow economic recovery, tenants remained financially strained.

Across the country, tenants spent 45.3% of their income on debt repayments in Q4 2021, up from 40% a year earlier. Additionally, 29% of the budget was used for rent, which is in line with the previous year. Consequently, tenants had 25.7% of their income available as disposable income to cover their everyday expenses, down from 30.9% in 2012.

For women in the country these and other factors are some of the leading causes of overwhelming debt and financial devastation, notwithstanding the deep societal issues such as gender inequalities. Women are also often the target of the bulk of consumerist culture encouraging unnecessary spending. So, whether it’s the gender pay gap, motherly commitment, or financial abuse, women are more likely to be in debt for a number of reasons.

While we are living in post-modern times, a whole 60 years after the International Labour Organization (ILO) introduced equal remuneration and non-discriminatory employment practices, South Africa and the world at large still has quite intrinsic gender pay gaps. South Africa, in particular has various pieces of legislation aimed at preventing gender discrimination in the workplace. Yet, the country has a stagnant median gender pay gap of between 23% and 35% with the average global gap currently standing at about 20%, according to the ILO. So, differences in wages between men and women is a key causal factor for women’s over-indebtedness.

Another leading cause of over-indebtedness among women is financial abuse which forms part of the overarching scourge of domestic abuse in this country. Although not as physically visible as the violent nature of domestic abuse, financial abuse is still the lived experience of many South African women. Some identifiable signs of financial abuse include abusers taking out loans or opening accounts in their partners’ names, making their partners stop work so that they are dependent on them, forcing their partners to hand their wages over to them, or continuously relying on the partner to foot the financial responsibilities of the household even when they also earn a living.

This final layer also speaks to the notion of women solely parenting children which in itself is a huge financial burden on women. The veritable fact is that the majority of single parent household are led by women. This is according to the Human Sciences Research Council (HSRC) and the South African Race Relations Institute (SARRI), which states that more than 40% of South African mothers are single parents. In the current economic climate, it is not surprising that 51% of SA’s single mothers are not able to easily afford household expenses.

The situation might be really dim, but there are steps that women can take to navigate and overcome their financial hurdles. The Chief Executive Officer of National Debt Advisors Charnel Collins offers the following tips to help women become more financially secure:

Make sure you set financial goals. Identifying specific, targeted goals today can help you become financially stable in the future. Whether it is to plan for a vacation, make a down payment on a mortgage, or save up for your child’s college education, always set short and long-term goals. By putting a timeline on each goal, you can get ahead and save money in smaller amounts.

Keep track of your finances. Having a thorough understanding of your finances is beneficial. Ensure you know what money comes in and goes out by reviewing your accounts daily or weekly. By doing this, you will also be able to become familiar with your spending habits, your creditors, and your bank account balances. Tracking your finances helps make sure your money is secure, your payments are clear, and your bills are paid on time.

Create a savings account that you cannot easily access. In general, it is recommended to have an emergency fund of three to six months’ living expenses, but in reality, you should save whatever you can. With just R100 per week put aside in a savings account, you will become more financially independent. Extra money in the bank can help you push through an otherwise challenging time and give you peace of mind that you have a safety net in place.

Reduce your debt. Debt isn’t always bad, like a bond on your home loan, but other types should be minimized as soon as possible. Even if it means paying an additional R20 a month on your credit card balance, pay down your high-interest debt. Every single amount above the minimum payment helps.

Invest in your future. While making sure you can cover unexpected expenses and events, putting aside money to cover life, disability and credit life insurance is also part of planning for the future. In the event that you become incapacitated or need to transfer your property and money, having an estate plan in place will help simplify the process of deciding who would be the beneficiaries of your estate.

“Even though barriers will always exist, you should find ways to protect yourself and ensure your financial well-being in the future. Financial security can be achieved by knowing their finances, having savings, setting goals, building credit, and minimizing high-interest debt,” said Collins.

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