In this article, we cover the following:

• what are mashonisas?
• the growth of mashonisas in South Africa
• what’s driving their popularity
• the disadvantages of mashonisas
• what Lamna offers.

What are mashonisas?

The term “mashonisa” is a South African word for any informal lender, especially one operating in the townships.

Mashonisas are not registered with the National Credit Regulator. This does not mean that their lending activities are necessarily illegal. However, they aren’t subject to oversight.

This increases risk for borrowers. It also means there’s no official avenue of recourse for those who have complaints or are subjected to illegal or unethical practices.

Typically, mashonisa loans are very short-term, from one to six months. They may range from as little as R50 to R8,000 or more (in some cases, much, much more).

Number of mashonisas in South Africa

There’s no shortage of mashonisas in South Africa. Conservative estimates put the number at 40,000 active mashonisas.

In Khayelitsha alone, there are an estimated 1,350 mashonisas in operation, serving approximately 135,000 households.

Research suggests that up to 80% of South Africans have used a mashonisa.

Due to the large (and growing) number of mashonisas, meaningful regulation is virtually impossible.

Who uses mashonisas?

The term “mashonisa” is associated with informal lenders in townships. However, not all their transactions are small.

Also, it’s not only the poor who take loans from mashonisas in South Africa.

As far back as 2017, a Mail & Guardian article noted how middle-class South Africans were turning to mashonisas.  

An informal lender in Sandton noted that he “…often finds himself lending money to people who earn quadruple or seven times his salary”.

A Ventures article also points out that many borrowers  use these informal loans alongside formal products – reinforcing the point that informal loans are more than just a “last resort” for consumers.

What’s driving the popularity of mashonisas

Despite the lack of regulation, mashonisas fill a gap in the lending market. They offer easily accessible, very small loans, which aren’t readily available from banks.

The loans are almost always instantaneous. Also, it’s easier for people to borrow money from someone living in their community than to travel to a lender’s office.

Disadvantages of mashonisa loans

Unsurprisingly, mashonisas don’t always have a good reputation. Many consider them to be disreputable loan sharks.

Either way, their lack of regulation is a genuine concern. It means they can charge as much interest as they like – up to 50% in some cases.

Because there is no NCR oversight, there’s also nothing to stop mashonisas charging hidden fees and penalties. For example, a mashonisa may charge extra if a loan is repaid early. 

The potential for criminal activity is also high. Independent investigations have found that collection practices can include intimidation, social shaming and the seizure of assets.

What we offer at Lamna

Lamna offers a separate alternative to mashonisa loans or traditional bank loans.

With us, you can use a paid-off asset, such as a car or an item of jewellery, to secure a short-term loan. We’ve been offering asset-based loans for many years and have physical branches in most major cities across South Africa – as well as in London, U.K.

The advantages without the risks

Our loans are also fast, simple and don’t impact your credit score. Unlike mashonisas, we’re a registered FSP and adhere to NCR regulations. There are no exorbitant interest fees or hidden penalties.

At the end of the loan period, provided the loan and interest are repaid, your asset is returned to you in the same condition you left it. This type of asset-based loan is a low-risk way to unlock the value of an asset without selling it.

For more information about using an asset to secure a short-term loan, contact us on 086 111 2866, WhatsApp 068 725 9701 or simply complete and submit our online application form.