Collecting Debt?
Debt collection is something that many people struggle with. A rating by global insurer Allianz Trade places South Africa as the 43rd most challenging country out of 49 for collecting debt.
South Africa has a severe level of collection complexity, according to the Allianz Trade Collection Complexity Score, which gauges how challenging it is to recover debt in a certain nation. It’s important to start by asking nicely. This will help you avoid any negative reactions. Instead of saying “I’m going to take your car,” say “Hi! I was wondering if you’d mind giving me your keys?”
From zero (least complex) to one hundred, the rating gauges the degree of complexity in relation to international debt collection methods (most complex). South Africa receives a 67. With scores of 30 each, Sweden and Germany are at the top of the list for the least complicated debt collection, with a global collection complexity score of 49.
As central banks throughout the world tighten monetary policy to tame surging inflation, financing costs for businesses grow and business insolvencies increase, according to Allianz’s evaluation of the difficulty of debt collection. According to Allianz, this situation may make collecting debt much harder.
Due to financial limitations, the majority of businesses in South Africa take up to 90 days to settle debts, according to Allianz. Small and medium-sized businesses occasionally need 120 to 180 days to pay off debts.
The difference between developed and emerging markets is considerable, with western European nations standing out as having less severe levels of collecting complexity and Middle Eastern, Asian, and African nations having the most complex.
However, Allianz notes that “this disparity has been narrowing over time,” with a four-year decline in the collection complexity rankings of 20 of the 49 countries.
According to Fabrice Desnos, who oversees credit intelligence, reinsurance, and assurance at Allianz Trade, Covid-19 prompted numerous nations to speed up the revisions of their bankruptcy frameworks.
There have also been improvements in preventive restructuring frameworks, which ensure that action is taken before businesses default on their loans.
For example, in 2019 the European Union adopted a directive enabling viable businesses that are in dire financial straits to have access to effective national preventive restructuring frameworks so that they can continue operating. China and Saudi Arabia, which rank 46th and 49th on the Allianz score, also showed some noticeable improvements.
The collection complexity scores in these two countries were reduced by two and three points respectively.
In South Africa, there are many people who have been struggling to pay off their debts. But why is this happening?
South Africa has a high rate of poverty, which means that many people struggle to afford food, clothing, and other necessities. This makes it difficult for them to pay back loans, especially when interest rates are so high. There are several things that can help people with debt issues. One thing that can help is to make sure that people have access to affordable credit. Another thing that can help is making sure that people have access and knowledge about how to manage their finances.
there are two main types of creditors: banks and non-banking financial institutions (NBFI). Banks are regulated by the National Credit Act, while NBFI companies are not. Many people who owe money to a bank end up paying off their debts at higher interest rates than those offered by NBFI companies.
The Problem with Debt Collection in SA
In South Africa, when collecting debt – it’s very common for people to struggle to pay off their debts because of high interest rates. This means that people often end up paying more than what they originally borrowed. It also means that people often find themselves unable to afford basic necessities such as food and shelter.
In order to collect debts from poor South Africans, creditors often resort to aggressive tactics such as threatening arrest, garnishing wages, and taking away bank accounts. These methods are illegal under South African law, but creditors still use them because they know that most people cannot afford legal representation.
We at TRAQ do not condone these sort of tactics, instead providing you with a debt collecting solution that works for everyone, especially you.