Cash Transfers and Debt
In mid-2018, the delivery of South Africa's social grants was brought under the Post Office's remit. And yet, even though grants are now distributed by a public entity, debt continues to be implicit in the system. Deborah James, David Neves and I researched how social grantees remain a significant market for formal and informal money-lenders. We found that creditors use government grants as collateral for credit because such payments are regular and secure incomes. We also found they charge extremely high (though legal) interest rates based on the erroneous perception that grant recipients are a "risky" market. Given these findings, we are advising the National Credit Regulator, Department of Trade and Industry, Department of Social Development, and the South African Social Security Agency on how to protect social grantees from reckless lending.