South Africa's parliament approved new legislation on Wednesday to help open up the credit market to the poor and stop unscrupulous lenders. The National Credit Bill aims to improve access to affordable credit for millions of poor, black South Africans who remain outside the economic mainstream more than a decade after the end of apartheid.
"It is a market that both reflects and reinforces existing disparities in South Africa," Trade and Industry Minister Mandisi Mpahlwa told delegates of South Africa's second parliament chamber.
"It is characterised by a lack of transparency, limited competition, high cost of credit and limited consumer protection," he said.
The law will regulate the industry, imposing a code of conduct on credit providers that will force lenders to assess consumers' ability to pay before giving credit and aims to stop providers charging exorbitant rates.
Mpahlwa said it would help reverse decades of systematic discrimination against black South Africans by "improving and increasing access to credit at reasonable rates from reputable credit providers".
South Africa's credit market is dominated by the country's four major banks that largely service the formal sector and employed people, leaving the poor to approach small lenders, many of whom are unregulated, for credit.
The bill has already been passed by the National Assembly.