Unsecured lending and the indigenous economy in Australia and South Africa
| Published date | 01 March 2021 |
| Author | ANDREW HUTCHISON,DOMINIQUE ALLEN |
| DOI | http://doi.org/10.1111/jols.12280 |
| Date | 01 March 2021 |
DOI: ./j ols.
ARTICLE
Unsecured lending and the indigenous economy
in Australia and South Africa
ANDREW HUTCHISON1DOMINIQUE ALLEN2
Department of Commercial Law, Faculty
of Law, University of Cape Town,Kramer
Building, Middle Campus, Rondebosch,
Cape Town, ,South Africa
Department of Business Law and
Taxation, Monash Business School,
Monash University, Dandenong
Road, Caulfield East, Victoria ,
Australia
Correspondingauthor
AndrewHutchison, Department of Com-
mercialLaw, Faculty of Law,University
ofCape Town, Kramer Building, Middle
Campus,Rondebosch, Cape Town, ,
SouthAfrica
Email:andrew.hutchison@uct.ac.za
Abstract
Consumer credit is closely regulated in both Australia
and South Africa. Nevertheless, unsecured lending
often results in financial hardship in low-income com-
munities. One aspect of this picture is the impact of
the consumer debt burden on the Indigenous economy,
which is disproportionately affected by poverty in both
countries. Here we juxtapose the comparative regula-
tory regimes and then contextualize the law using an
inter-disciplinary account of each Indigenous economy.
We find through this law-in-context comparison that
neither Australia nor South Africa has fully resolved the
problem of Indigenous financial hardship. This mutual
failure is confirmed by the recent Kobelt decision of
the High Court of Australia and the drastic measures
enacted in the South African National Credit Amend-
mentAct.OnepositivelessonthatSouthAfricapro-
vides is that accommodating the Indigenous economy
in financial regulation can promote and empower that
sector.
INTRODUCTION
Indigenous persons are disproportionately affected by poverty in both Australia and South
Africa.From a consumer credit point of view, this disadvantage plays out through
widespread financial hardship, with debt often being used to finance basic consumption
© The Author.Journal of Law and Society © Cardiff University Law School
Statistics demonstrate that Indigenous persons are disproportionately affected by low-income status in both countries.
See Australian Institute of Health and Welfare, Australia’s Welfare 2017: In Brief () at <http://www.aihw.gov.au/
reports/australias-welfare/australias-welfare-- in-brief/contents/Indigenous-australians>; Statistics South Africa,
Living Conditions of Households in South Africa: An Analysis of Household Expenditure and Income Data Using the Liv-
ing Conditions Survey 2014/2015 () at <http://www.statssa.gov.za/publications/P/P.pdf>.
wileyonlinelibrary.com/journal/jols J.Law Soc. ;:–.
expenditure.Consumer credit law,particularly that relating to unsecured lending in short-term
credit transactions, is intended to protect low-income debtorsfrom the clutches of payday lenders.
Nevertheless, poverty creates a demand for accessible credit, which is all too often provided on
terms detrimental to the well-being of low-income communities.
Although the societal contexts of South Africa and Australia are different, we use a law-in-
context analysis in this article to illustrate that the Indigenous economies of both countries are
sites of financial hardship that require special regulatory attention. South Africa has gone part of
the way towards creating specific financial regulation for this context, as we shall demonstrate
below. Australia still adheres to a system of formal equality of treatment in its approach to the
Indigenous economy, as illustrated clearly in the recent High Court of Australia case Australian
Securities and Investments Commission v. Kobelt,which dealt with the controversial practice of
‘book-up’ in remote communities. While neither country has managed to cure Indigenous finan-
cial hardship, we argue in favour of South Africa’s approach, which we label ‘inclusive finance’,
rather than the more assimilative tag ‘financial inclusion’.
With regard to comparative macro-societal contexts, Australia and South Africa are countries
that have much in common, including being former British colonies that have retained British-
style democratic institutions post-independence. Both have legal systems that are strongly influ-
enced by the English common law (although South Africa is better described as a ‘mixed’ system).
With regard to the treatment of the original inhabitants of the land, both have a history of racial
discrimination, which includes dispossession and a denial of access to equal education, employ-
ment, and goods and services.
This commonality has played out in different ways. Aboriginal and Torres Strait Islander peo-
ples in Australia were decimated by the settler influx and now constitute only per cent of the
population. These peoples are made up of a diverse group of cultures and traditions and manyare
located in remote regions of the country.Furthermore,with regard to democratic power in Aus-
tralia, although there are some Indigenous members of parliament at both the federal and local
levels, it could not be said that Indigenous people are well represented or wield power.The current
The inability to raise emergency funds is regarded as an indicator of financial stress. In Australia, per cent of Indige-
nous Australians aged and over reported that no one in their household could raise AUD$,for an emergency in a
week, which is . times the rate for non-Indigenous Australians:Australian Bureau of Statistics, National Aboriginal and
Torres Strait Islander Social Survey: 2014–15(), at <https://www.abs.gov.au/ausstats/abs@.nsf/mf/.>.Asurvey
by the Centre for Social Impact for National Australia Bank reports that Indigenous respondents found it more difficult
to meet their regular expenses and were more far more likely to use fringe credit providersthan non-Indigenous respon-
dents (. per cent compared to . per cent). Both groups reported that they needed credit to pay for utilities and house-
hold expenses: Centre for Social Impact for National Australia Bank, Measuring Financial Exclusion in Australia ()
, at <http://www.csi.edu.au/media/uploads/Measuring_Financial_Exclusion_in_Austraila_-_May_.pdf>. This is
reflected in the facts of the Kobelt case, discussed below. Often, the reason that customers entered into credit arrange-
ments with Kobelt was to purchase basic household items between welfare pay days. People with a debt at his general
store were sometimes permitted to access their welfare payments (which were otherwise being used to service the debt)
to purchase bread, milk, and meat only.In regard to South Africa, see M. Bateman, ‘South Africa’s Post-Apartheid Micro-
Credit Driven Calamity’ () Law, Democracy and Development , at ; P. Mashigo, ‘The Debt Spiral in the Poor
Households in South Africa’ () International Indigenous J.of Entrepreneurship, Advancement, Strategy and Education,
at <http://www.indigenousjournal.com/IIJEASVolIIIssMashigo.pdf>.
Australian Securities and Investments Commission v. Kobelt [] HCA (Kobelt H CA). This case is discussed in detail
below.
Australian Bureau of Statistics, Estimates and Projections, Aboriginal and Torres Strait Islander Australians, 2001 to
2026 () Cat. No. .; AustralianBureau of Statistics, Population Distribution, Aboriginal and Torres Strait Islander
Australians, 2006 () Cat. No. ..
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