By Helen Nyambura-Mwaura
JOHANNESBURG (Reuters) - UK-based online short-term loan provider Wonga has achieved growth "beyond expectations" in South Africa, the company said on Wednesday, even as concerns grow over levels of unsecured lending in the continent's top economy.
Only a year and a half since launching in South Africa, Wonga extends tens of thousands of loans a month and has so far escaped the criticism it has received in its domestic market.
The London-based lender, which has come under fire at home from the Anglican Church for charging annual interest rates of 5,853 percent, offers South Africans loans up to 8,000 rand at 0.17 percent per day for a maximum of 50 days.
South African analysts, however, are concerned about the surge in unsecured lending in recent years, highlighting the risk of default on high-interest loans not backed by collateral in a country where household debt already accounts for three quarters of disposable income.
Wonga's chief executive for South Africa, Kevin Hurwitz, is more upbeat on the market's prospects.
"It has been very encouraging, beyond expectations," he told Reuters when asked about growth since the company's South African launch.
"We want to be able to grow fairly aggressively, but in a responsible way," he added.
Wonga, which also has operations in Spain, Canada and Poland, accepts 25 percent of first-time applications in South Africa and plans to increase that to 30 percent, Hurwitz said.
Most of the loans have been to individuals to pay for education or health, and the lender plans to launch a product for small cash-strapped companies.
Wonga's optimism is not shared across the sector. Some South African banks are already starting to slacken the pace of unsecured lending after a spike in bad debts and the South African Reserve Bank said on Wednesday that such lending has been losing momentum.
A study commissioned by Wonga and released on Wednesday said there was no debt bubble forming and that the high growth of unsecured loans helped many low-income earners tide themselves over in the post-recession years.
Hurwitz said that Wonga, which last month posted a 36 percent jump in full-year profit, is seeing high single-digit default rates in South Africa and that this is on a par with its business elsewhere.
"In the formal sector, it is going to continue to play a very important part in the economy," he said, referring to unsecured credit.
Archbishop of Canterbury Justin Welby said in July that Wonga took advantage of poor households struggling to get by in austerity conditions and he pledged to drive the "morally wrong" company out of existence by launching the church's own not-for-profit credit unions as an alternative for Wonga customers.
Britain's consumer watchdog this year ordered a review into so-called payday lenders after finding deep-rooted problems in the way the industry treats consumers.