South Africa: A Promising Landscape for Fintech and Alternative Lending
- MD Finance Team
- 4 days ago
- 3 min read
South Africa has become one of the most developed financial markets on the continent, accounting for around 40% of all fintech revenue in Africa. South Africa’s fintech and alternative lending sectors are expanding, driven by mobile-first innovation, a large share of the unbanked population, and rising demand for credit under deep financial stress.
In the latest MD Finance report, we investigate the country's fintech and alternative lending markets, consumer credit behaviour, and the opportunities and risks facing non-bank lenders.
Macroeconomic Overview
South Africa benefits from high internet penetration (78.9% of the population) and a youthful median age (28.7 years), but GDP growth has remained sluggish. After a modest post-pandemic recovery in 2021, economic activity slowed again, reaching just 0.6% in 2023 due to rolling power blackouts, logistics bottlenecks, and softer commodity prices. The forecast for 2025 is slightly better, with 1% projected growth and inflation at 4%.
Long-term unemployment at around 32% and widespread poverty are defining features of the consumer landscape. Over 60% of the population lives below the poverty line, resulting in rising demand for borrowing that has become essential for the financial survival of South Africans.
Credit Access and Regulation
The local credit market is dominated by banks, which accounted for 79.5% of R132.5B (USD 7.4B) in new credit issued in Q1 2024. The non-bank sector is also expanding, with non-bank financiers issuing 6.9% of new credits, while retailers and other credit providers accounted for 6.5% and 7.2% respectively.
In total, the non-banking credit system comprises 8,525 registered credit providers operating across 40,901 branches. More than 8,100 of them are classified as “short/long term and others” category, which means a strong indicator of market diversity.
The National Credit Act enforces strict cost-of-credit parameters. The maximum interest rate for short-term consumer loans remains capped at 5% per month (approximately 60% APR), and the National Credit Regulator (NCR) has precisely enforced this cap. It continues to investigate and prosecute predatory or unregistered lenders, including those charging an overmonthly interest rate or issuing loans without conducting affordability checks.
Growing and Risky Alternative Lending Landscape
In Q1 2025, demand for unsecured personal loans increased, particularly among consumers who use credit to cover everyday expenses. Personal loan originations from non-bank lenders rose 11.5% YoY, with 35% of report individuals planning to apply for a loan in the following year. However, rising defaults can impose a serious risk to market development.
Non-bank lenders may have to refocus their risk management strategies. By late 2024, 41.3% of current borrowers, the vast majority of whom were below-prime, had been delinquent for over three months, marking the highest delinquency rate since Q2 2021. These figures reveal the money challenges many South Africans face and indicate the need for stronger credit risk controls.
In March 2024, the Financial Sector Conduct Authority (FSCA) introduced Open Finance proposals to improve data sharing and competition. The pending Conduct of Financial Institutions (COFI) Bill is expected to consolidate lender regulation under a single law, ensuring fair treatment and stronger consumer protection.
Fintech Trends and Market Innovators
The South African fintech ecosystem benefits from a well-developed financial infrastructure, high mobile penetration, and a rising talent pool, which together boost technology disruption. Key fintech players are reshaping access, speed, and credit scoring.
Lulalend is a digital lender focused on automated credit lines for underserved SMEs, having raised $35 million in Series B funding in 2023, led by global impact investor Lightrock. Over the past three years, the startup has embedded credit solutions into partners, including telecom operator Vodacom, Fintech Yoco, and e-commerce giant Takealot, as part of a credit distribution strategy.
PayJustNow, a buy-now-pay-later (BNPL) platform, partnered with major retailer Pick n Pay to offer instalment plans for high-ticket non-food items. Customers are expected to pay 34% of an item’s price upfront, with the remaining 66% split into two 33% instalments, “aligned with their subsequent salary dates.”
Vodacom, a telecommunications company, has launched VodaLend Personal Loans in collaboration with Old Mutual Finance, offering unsecured personal loans of up to R250,000 through its app. It also rolled out Vodacom Cash Advance, providing microloans from R50, repayable over 7-28 days.
Aventus Group recently announced the launch of a specialized SME lending unit in Cape Town, targeting SMEs that lack access to traditional bank financing. This signals rising interest from international non-bank players in South Africa’s credit ecosystem.
Download the full report for a deeper dive into the market landscape and learning how alternative lending companies perform in South Africa.
