‘Mashonisa’ is a term used in South Africa to describe illegal money lenders. Mashonisas are people who lend money despite not being regulated by any authority or complying with money-lending laws. A mashonisa is what might be referred to as a ‘loan shark’ in other territories.
Mashonisas and Illegal Money Lending
However, it’s particularly common for South Africans to source money from these figures, with over 40,000 operating across the country.
Why people turn to mashonisas
People use mashonisas for a wide range of reasons. Some people borrow money from mashonisas because they wish to avoid the more formal method of applying for credit from elsewhere. Credit ratings are not affected by borrowing from mashonisas, and there is very little paperwork to manage. People are also attracted to this form of lending as it can give them quicker access to the funds that they need. Using a local mashonisa can also help people avoid travelling to source funds.
The hazards of illegal lending
Theoretically, anybody with sufficient capital to lend money could become a mashonisa. Nonetheless, it’s important to respect the risks of using a mashonisa. A lender who seems friendly initially could turn violent if someone is unable to pay. Customers have no legal protection when they become customers of mashonisas, who are entirely unregulated. Nonetheless, some customers argue that they have never experienced any problems after borrowing from mashonisas. Some argue that they enable people to access short-term funding when they can’t source it elsewhere.
Risks still being taken
Mashonisas are used by many South Africans despite the fact there are several risks attached to lending money via these methods. It’s not uncommon for mashonisas to confiscate personal documents and bank cards until debts are settled. Mashoninas sometimes charge very high interest rates. Until someone has repaid their loan, they may keep them under constant surveillance. If you cannot repay your mashonisa, they may become violent towards you. One reason why mashonisas don’t tend to offer generous interest rates is that they may be attacked themselves if they undercut their competitors.
Are all mashonisas violent or intimidating?
Although the mashonisa may seem a formidable figure, evidence suggests that not every one of these lenders is particularly aggressive or intimidating. Aside from their money-lending activities, some mashonisas were generally law-abiding citizens. A study carried out by the legal money lender Wonga found that local hotel and post office workers were acting as mashonisas, as was a saleswoman for Avon.
The advantages of legal money lending
It’s always better to borrow from a legal money lender if this is an option. You’re likely to get much better interest rates from a traditional lender. Formal lenders are also regulated, so they are bound by stringent rules. An illegal lender is less likely to come to a helpful arrangement with you if you need more time to pay. Illegal lenders are also less likely to keep your borrowing between the two of you. Nonetheless, many people say tighter regulations and lending criteria are still forcing them to turn to mashonisas.
Mashonisas and the law
Most mashonisas know what they are doing is illegal, However, the vast majority felt there was little likelihood of legal action being taken against them. Wonga’s informal lending report also found that borrowers came from various walks of life and that lenders weren’t simply targeting those on the poverty line.
Many white-collar staff were being enticed with larger loans. The report said mashonisa market was “almost certainly ineradicable” with as many as 40,000 mashonisas in South Africa. A considerable number of borrowers were using formal and informal credit at the same time. Loans were normally expected to be repaid within a month, with interest often being charged at around 50% per loan.
