Experian’s Consumer Default Index (CDI) has found that young people are falling behind in the formal economy despite a drop in credit.
The recent data revealed that the default rate among young people aged between 20 and 29 has declined from 7.21% to 5.79% year on year.
Matiisetso Madito, the chief of credit bureau services at Experian South Africa, said this suggested improved financial behaviour among young consumers but believes it is because many young people are not accessing credit.
“With youth unemployment remaining high, lenders have naturally adapted their risk frameworks, resulting in fewer young people qualifying for new credit products,” said Madito.
Generation of ‘credit invisibles’
According to the data, youth make up 24% of the adult population but hold only 10% of active credit and account for 4% of the country’s R2.39-trillion in outstanding credit. Madito said this showed a rise in a generation of “credit invisibles”.
“While lower default rates among our youth may seem like good news, it’s a hollow victory if they are being omitted from the financial system altogether. With youth unemployment at a staggering 40.6%, we are witnessing the creation of a ‘credit invisible’ generation.
“This isn’t just a challenge for young people; it poses a growing risk to the broader national economy. Sustainable entry into the financial system is essential to helping the next generation build a stable economic foundation. Our focus must be on finding ways to responsibly and sustainably include them, not exclude them,” said Madito.
Limited exposure to wealth-building instruments
She said where young consumers do participate, they tend to cluster around entry-level products such as retail loans and vehicle asset finance, but exposure to wealth-building instruments remains negligible as home loans account for 1% of youth credit exposure.
Beyond the youth segment, the credit market has shown increased pressure as consumers are now pushed to choose which financial obligations should be prioritised. However, home loan default rate improved heavily, dropping from 16% to 1.86% YoY. Retail loan defaults increased by 11% YoY to 17.18%, while personal loans also deteriorated.
Applications rebounded in the first quarter after the usual January slowdown, reflecting the widening gap between household incomes and the cost of living. However, approvals continue to decline.
“This is a climate where credit health education is more critical than ever. Both consumers and lenders are navigating incredibly tight margins. For young South Africans especially, understanding how to manage credit conservatively from the very start of their financial journeys is key to long-term economic resilience,” said Madito.
- Experian's Consumer Default Index shows youth default rates dropped from 7.21% to 5.79%, but this reflects fewer young people accessing credit due to high youth unemployment.
- Young people (20-29) make up 24% of adults but hold only 10% of active credit and 4% of R2.39 trillion outstanding credit, creating a "credit invisible" generation.
- Youth credit exposure is mostly in entry-level loans (retail and vehicle finance), with minimal participation in wealth-building products like home loans (1% of youth credit).
- Overall credit market pressures are rising; home loan defaults fell significantly, but retail and personal loan defaults increased year on year.
- Credit health education is crucial as young South Africans face tightening credit approvals and must learn to manage credit cautiously for long-term financial stability.
