Retail credit

 
Retail credit business relates mainly to loan business provided by Sanlam Personal Loans (SPL) and up to July 2010 also Sanlam Home Loans (SHL). Sanlam disposed of its interest in SHL with an effective date of 1 August 2010. The Group is exposed to financial risk through the following:
 
> SPL is a joint-venture investment of the capital portfolio that has been equity-accounted based on Sanlam's percentage interest in its net asset value.
> The Group has also provided financing to SPL.
 
The balance of loans advanced at 31 December 2010 is shown below:
 
2010
2009
R million
Non-
securitised
loans
Securitisation
vehicle
Total
Non-
securitised
loans
Securitisation
vehicle
Total
Sanlam Personal Loans
           
Gross balance
1 818
1 818
1 495 1 495
Provisions
(71)
(71)
(100) (100)
Net balance
1 747
1 747
1 395 1 395
Sanlam Home Loans
           
Gross balance
800 3 953 4 753
Provisions
(36) (22) (58)
Net balance
764 3 931 4 695
 
The main risk emanating from the retail credit operations is credit risk. The Group's maximum exposure to credit risk comprises the following:
 
> As SPL is a joint venture that has been equity-accounted based on Sanlam's percentage interest in its net asset value, the Group is exposed to credit risk to the value of the investment, which is disclosed in note 7.
> The Group Treasury function has also provided financing to SPL as indicated above. This exposure is managed by the Capital Management operations.
 
Credit risk consists of credit standing and default risk. Advances are only granted to recognised, creditworthy parties. It is the companies' policy to subject their potential customers to credit verification procedures. In addition, balances of advances are monitored on an ongoing basis. Collections strategies are in place to mitigate credit risk and all accounts in arrear are given due priority. The table below shows the outstanding balance of arrear accounts of SPL as a percentage of the total book.