Be it a credit card or a debit card, plastic money or E-money has become part and parcel of the Mauritian lifestyle. Last month during the launching ceremony of a new credit card, Mr Rundheersing Bheenick, Governor of the Bank of Mauritius, warned credit cards providers to be very cautious when dealing with clients.
“You should conduct a proper screening of your clients to ensure that your credit card advances do not turn into bad loans. You should ensure that you have in place procedures to chase the bad clients and a good fraud investigation framework,” he said.
Creditworthiness of prospective borrowers needs to be assessed in a bid to reduce the non-performing loan ratio. “Therefore, prudence in credit risk management should be your priority,” he said. According to the BoM, between 2000 and 2010, credit card advances have increased by more than 175%.
“The credit card has grown to become a ubiquitous financial product used by households,” said Mr Bheenick, explaining that there are more than one million credit cards in circulation for total advances amounting Rs1.6 billion, the biggest chunk, Rs1.5 billion, representing credit to the personal and professional sectors.
Consumers use credit cards for two purposes: 1. as a substitute for cash and cheques, and 2. as a source of revolving credit.
“Therefore my question is whether the consumer fully understands the costs and implications of using credit cards and whether credit cards are encouraging over-indebtedness, particularly for those least able to pay?” he asked.
In Mauritius, credit card advances currently represent around 3% of total household credit. “As a regulator we need to remain vigilant and keep an eye on the delinquency rate of credit cards,” said Mr Bheenick.
BOM’s governor warned credit card providers that customers should get a fair deal, referring to complaints made by customers about the amount of money they have to pay out monthly for card-related fees.
Mr Suttyhudeo Tengur, president of the Association for the Protection of the Environment and Consumers (APEC) told NEWSNOW that “access to credit card facilities makes people live permanently on credit.
“Access to plastic money is too easy and is inviting people to live above their financial means. It’s dangerous to live above our financial means,” Mr Tengur warned. “It’s through education that we can sensitise the population of the danger these instruments represent. Otherwise, a subprime crisis will reach our shores.”
For Mr Eric Ng, economist and director of consultancy firm Pluriconseil, “plastic money is just a payment facility with a limited amount of money”. He rejected the idea that credit cards are a means of indebtedness, suggesting that a cardholder has to manage his budget equitably.