Relieving the immediate and often debilitating financial distress in which employees find themselves is usually the focus of employer-led financial wellness programmes. But the goal can, and should, be bigger and longer term.
One of the serious ramifications of over-indebtedness, is a credit profile and score that prevent the consumer from accessing secured credit, notably home and vehicle financing. This leaves the individual unable to invest in assets that can play an income generation role in some way. A vehicle, for instance, could enable a delivery job as a second income stream, while an extra room in a house can be rented out. Property can also serve as collateral for further secured lending, and/or provide the owner with an investment return should it increase in value over time.
Without the goal of accessing secured credit in order to acquire assets that can contribute to wealth creation, unsecured lending too often becomes an end in itself. The absence of a bigger goal can contribute to keeping employees in an unsecured lending cycle, even if they manage it well and do not become over-indebted.
Bayport’s experience over the past four years with its employer-led programme has shown that a fair percentage of employees whose credit scores improve sufficiently, proceed to acquire home and vehicle financing. At Exxaro, which was one of the first employers to partner with Bayport, employees who had joined the programme over the years, have acquired secured loans to the value of almost R70 million. Around 59% of people who enrolled in the programme seeking debt relief, have improved their credit scores, some by up to 52 points.
The numbers in themselves are impressive and encouraging, but it is the influence on the lives of households and families that require even more consideration. What is the impact of a sense of security, dignity and pride that comes with owning the home in which you live? What does it mean to no longer be at the mercy of a landlord? How does homeownership influence the hopes and dreams of children growing up in that household? In what ways do the money conversations in the household change when the property is “ours” and not “theirs”?
The answers are as unique as each individual household, but there can be no denying that the process of wealth building changes people and their views of the world.
In the interest of a more constructive national conversation about debt, responsible lending and the credit-behaviour of consumers, it is important to acknowledge and leverage the power inherent in employer-led financial wellness programmes to facilitate wealth building.
