When talking about the role of credit in an economy, a fundamental distinction is often missed: the difference between lending for general consumption and lending for a specific, productive purpose. The first approach is broad and unfocused – typically resulting in the burdensome scenarios that lead to the fear associated with debt. The second, in our view, is the most responsible and constructive way to align finance with the real economy – when a loan is tied to a clear goal like education, a vehicle or business cash flow, we begin a productive dialogue about a purpose-led model.
This shift in focus is critical in South Africa’s current economic environment. We are a nation defined by a profound capacity to adapt. We see it in the Gogo who uses her banking app to manage her social grant, in the parents who provide a foundation for their children’s ambitions, and in the 12 million digitally-savvy young South Africans (aged 16-35) in our client base who, while facing a tough job market, are using their phones to launch side hustles.
For far too long, the formal financial system has struggled to keep pace with this dynamic economy. The traditional model, built for a world of single, formal payslips, was not designed to serve them. This is where the purpose-led model becomes more than a theory but rather a practical necessity.
Let’s be clear: credit isn’t harmless. Used badly, it can place people and their families under immense pressure; however, when used well, it can open doors. That’s why the way we design and price our lending is crucial. When a loan is clear, fair and tied to a tangible life goal, it becomes useful rather than risky. At its best, credit helps people move forward, not put them on the back foot.
Lending for life’s milestones
This purpose-led approach is not about how much you can borrow, but what you are trying to do, and what it would take to get you there. We see this play out across three areas:
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Education: Education is still one of the most reliable ways for someone to improve their earning potential. For many families, the barrier to education is the cost and the paperwork that comes with further study. A straightforward, affordable student loan can give someone the breathing room to take that next step without putting the household under further strain. By working with more than 25,000 education partners, we’ve made the process simpler and quicker so students can concentrate on their studies instead of worrying about how to pay for them
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Mobility: In much of South Africa, mobility is directly tied to income. A vehicle can open the door to work – or to a better job – and for e-hailing and delivery workers, it is the job. Responsible lending means looking beyond the instalment to the full cost of keeping a car on the road: fuel, tyres, maintenance, insurance, licence renewals, unexpected repairs and the other day-to-day running costs that add up. The Capitec Vehicle loan offering is rapidly growing in popularity due to the simplified application process, coupled with the reduced rates when a vehicle is procured from over 1400 Capitec affiliated dealerships across the country
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Home ownership: A home is usually the most stable asset a household can build over time. Our partnerships with more than 800 home-improvement retailer stores help clients invest in properties they already own, while our inclusive home-loan model creates opportunities for buyers to either own their first home or consider switching their existing home loan
The appetite for this kind of lending is obvious. Since March this year, purpose lending sales in education, mobility and home-improvement finance rose by 188% year-on-year, providing that necessary helping hand to more than 26 000 clients, which shows that clients want credit that will support their long-term goals.
Fuelling the economic engine
This same principle applies to the engine of our economy: the small and medium enterprise (SME). As The Banking Association of South Africa (BASA) notes, “the business of banking is inherently developmental”.
For some entrepreneurs – even within the over 300 000 business clients we serve – a significant barrier to growth is often cash flow. A financial partner will understand this and develop solutions that serve clients with, for instance, an affordable card machine that gets them their money the next day, not in a week, because they know that speed-to-cash is what allows a business to buy stock and pay suppliers. Being a partner also means a commitment to affordability. In our last six-month reporting period, our business clients saved R95 million through reduced commission rates and discounted device sales, freeing up capital that can be reinvested into their growth.
A true partner also takes the time to understand the business, not just the balance sheet. They understand seasonality, from a coastal restaurant in winter, to a clothing designer scaling up for a summer launch. This partnership approach changes an entrepreneur’s outlook. It gives them the confidence to invest in new stock before the festive season, knowing they have a partner who understands their cash flow, not an algorithm that will penalise them for a slow winter. This is how you support real, sustainable growth – not just with capital, but with understanding.
We see a South Africa defined by its potential. Our 25 million clients are the entrepreneurs, the builders, the problem-solvers and the graduates who will define our country’s next chapter. The role of a financial partner is to participate actively, remove barriers, and provide well-designed tools that support those who are building our country’s future.
By Wiehahn Koch, Head of Purpose Lending at Capitec