Loans for electricity – banks show increased lending appetite for alternative power solutions
First National Bank has adopted an aggressive lending strategy following an announcement in its interim results to December, where the bank said affordability indicators suggested that low- to medium-risk customers have the capacity for credit and a higher propensity to take up a broader range of financial services products.
For the six months to December, growth in unsecured lending – particularly card and FNB personal loans – picked up. Excluding the Covid-19 relief book and DirectAxis, FNB personal loans and card advances grew 10%. Customer preference for the new Fusion product, which is a transactional account with a credit facility, resulted in lower overdraft advances.
Although an aggressive lending strategy seems counter-intuitive in an economic environment where consumers are increasingly under financial pressure, banks are focusing on driving access to alternative energy solutions.
Speaking at a product launch earlier this week, FNB chief executive, Jacques Celliers, said there were 32 million pre-approved offers on the bank’s digital platform in January alone, and 80% of all pre-approved loans were paid out to customers within 10 minutes.
Celliers says the bank is on track to fund R1-billion in bounce-back loans to SMEs by May this year. The R15-billion bounce-back loan scheme, which has a government guarantee and low interest rates, was launched last year to provide financial assistance to SMEs that were affected by the lockdown, unrest and floods.
To date, FNB has extended nearly R900-million in bounce-back loans, of which R262-million went towards funding women in business.
Some of the credit offerings FNB highlighted this week included a standalone Aspire Credit card with a (relatively) low monthly fee of R42, and the FNB Fusion account which is aimed at those accessing the credit market for the first time. However, of more interest was the assistance FNB is offering to help customers access alternative energy supply. To this end, the bank has introduced a new nav>> energy feature on its app.
Customers can now access a wide range of alternative energy and back-up power solutions on the FNB app – from a UPS to power an internet router to a hefty battery to power a large-screen television, laptop and even a PlayStation – and pay for these items over 24 months via FNB Connect.
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Unlike the FNB Hero deals, which allow lower-income consumers to access smartphones at subsidised prices, the alternative energy solutions are available at market-related prices.
FNB customers can also apply for a solar energy loan financed through a new or existing home loan. This enables customers to apply for a loan starting at R50,000 and going up to 15% of their home’s value to finance the installation of a solar energy system from a pre-screened list of reputable renewable energy providers.
The customer’s property valuation will be increased to cater for the future installation of the solar energy system.
The amount of the solar energy loan will be added to the customer’s bond and recorded as a single loan at interest rates that align with their credit profile.
FNB will pay the deposit directly to the supplier upfront, so the customer will not be out of pocket unless there is a difference between the approved loan amount and the cost of the renewable energy solution selected by the customer – in which case the customer pays the difference or selects a more affordable solution.
The new solar energy loan solution complements existing ones, such as the ecoEnergy home loan solution, which was introduced in 2021 and has paid out R970-million to date.
Steven Barker, head of personal lending at Standard Bank, says the average solar installation value to date has been R176,000.
“Of the customers who have used funding for their solar systems, around 80% have been funded via their home loans, with the balance funded through unsecured loan options,” he says.
Over the last financial year, Standard Bank has financed 574 solar photovoltaic (PV) installations, representing approximately 147GWh of green energy per annum, and helped 365 green energy solution providers grow their businesses.
Over 625,000 users visited the LookSee website in 2022, up 550% from 2021, and Standard Bank helped homeowners install 900 solar panels, which are collectively generating 895MWh of renewable energy per year – along with 944 smart geysers.
“We calculate that we have saved homeowners more than R5.5-million annually through solar installations and smart home solutions,” Barker says.
In August last year, Nedbank launched a standalone asset-based finance offering through MFC in the form of a lease agreement for clients wanting to finance solar solutions.
A Nedbank spokesman said that, unlike the usual home loan offering, Nedbank Solar does not tie the client to the typical requirements of a further loan or re-advance, such as property valuations or having to worry about sufficient equity in the underlying property.
“Although the initial process to obtain the solar PV product is a little more complex to ensure that the right solution is matched to the client’s needs and wallet, the aim is to make funding the solution as easy as buying a car,” Nedbank says.
The interest rate on the Nedbank Solar product is aligned with vehicle finance rates and is payable over a period of up to 72 months.
Nedbank says that taking the monthly average of solar installations funded over the past two years against the monthly average of the newly launched asset-based solar product, 25% of solar solutions have been funded through a home loan and 75% through the asset-based product.
The bank is seeing upwards of 250 monthly applications for its standalone solar product. BM/DM