HR Directors, Loan Sharks Are Circling

If any of your staff earn R7,500.00 or less per month, I’d suggest this article is a must-read.

When President Cyril Ramaphosa signed the new National Credit Amendment Bill, (known informally as the ‘debt relief bill’) it changed how South Africans who earn less than R7,500 per month and are eligible to apply for debt relief, will be able to access credit.

On the surface, the new legislation has the consumer’s best interest in mind should they apply for debt relief, but it’s more complex than that, it (the new debt relief bill) also means that fewer reputable money lenders will be able to help these individuals in the future once they’ve entered this lengthy debt-relief process, which makes them vulnerable to more informal and less favourable money lending entities often referred to as ‘mashonisas’ or ‘loan sharks’, should they be in desperate need of further credit.

If you’re in HR you already know that whatever impacts the lives of your workforce will have a knock-on effect on the rest of the business. Many would argue that formal and reputable money lenders will need to play a vital role in helping avert any challenges that the informal money lending entities will no doubt bring about.

School fees, medical emergencies and even unexpected crises can require money we may not have at this very moment, and in these situations, it is unfortunate that some of us may become vulnerable to exploitation and perhaps even intimidation by criminal money lending individuals.

1. They Will Cost Your Business an Arm and a Leg

There is an unfortunate stigma associated with money lending, but the reality is that this is one of the primary functions of any bank. Home loans and car finance are essentially loans that allow us to pay back according to the terms and conditions that are suitable to us.

Reputable and established money lenders like the banks (and us at Wozipo Capital) can arrange terms with clients that are suitable for the individual’s needs without exploiting them.

However, because ‘loan sharks’ know that their clientele is desperate and have fewer options, they often subject people to unscrupulous terms that will cost them much more in the long-term than a more credible loan from a formal money lender would. A FIN24 article by Mandi Smallhorne suggests this inordinate interest can be as much as 100% per month!

The repercussions of an unscrupulous money lender may now affect members of the workforce and then indirectly affect the leadership of any organisation, impelling them to ensure that their staff is aware of the difference between a good money lender and a potentially dangerous one as well as what options may be open to them.

2. Desperation and Theft

Sadly, desperate times do result in good people resorting to desperate measures. In the absence of access to much-needed finances in a time of crisis, even the most ethical among us may become pressured to do things that would compromise our values.

We live in economically challenging times and the constant rise in the cost of living may be contributing to the rise of employee theft. An article by Livia Gershon from CreditDonkey indicates that employee theft is on the rise (up 79% between 1999 and 2013 alone).

The optimal situation is one that prevents this desperation from occurring in the first place. Access to an above-board loan with suitable terms may well prevent these kinds of “desperate measures”.

3. Depression and Low Performance

Financial stress has a major impact on an individual’s work performance. Furthermore, illegal money lenders can resort to intimidation and other unethical methods of getting their money and this can drastically influence the behaviour of anyone on your payroll facing these threats.

If your company relies on the accuracy of an individual’s performance, they need their utmost attention and zero distractions.

The stress that loan sharks can cause may eventually become chronic, which psychologist Melanie Gallo explains in an article for Forbes, is the most dangerous type of stress because of a “higher incidence of suicide, cancer, violence, heart attack and stroke.”

4. Absenteeism

Financial stress is like any stress, known to be bad for your health. Stress compromises the immune system and makes us far more vulnerable to viruses and bacteria, and it also makes us more challenging to work with. Stress can cause people to become quicker to anger and less cordial with colleagues and clients.

Also, some individuals who become desperate for access to finances may feel pressured to take on extra work and attempt to juggle more than one job and these individuals can also become more vulnerable to stress, illness and an increased risk of absenteeism.

No access to reliable money resources would very likely result in an increase in absenteeism among an otherwise robust workforce.

5. Food and Transport

Simply put, no money means no way to buy food and no ability to get to work. This has many knock-on implications, as you can well imagine.

One unfortunate circumstance could result in a member of your staff blowing their monthly budget, and without access to a loan, this person may not be able to buy groceries for themselves and their families. This is a problem that can escalate in any number of ways.

An inability to pay taxi fare or put fuel in one’s car poses a very real threat to your ability to get to work in the first place, never mind how well you will be able to function at work should you manage to get there. Then there’s the fact that nobody works well on an empty stomach. This can have a devastating impact on both the individual and everyone at the company this person comes into contact with.

6. Medical

Prevention is better than cure. But when there isn’t money available for regular checkups and medication for blood pressure, cholesterol or other ailments, these diseases can eventually snowball and become completely unmanageable.

Medical concerns require money, and if money isn’t made available they don’t go away, they get worse.

What will help? Well, providing your staff with ethical money lending options that won’t exploit them or put them in harm's way is a fantastic point of departure.

Chat to me about some solutions that will help your staff access credible and reasonable loans should they find themselves in an unforeseen situation that requires money they may not have at that moment.