AS AT the end of March this year, 229 990 Namibians were indebted to micro-lenders (cash loans) and owed a whopping N$6,8 billion.
Between January and March alone, micro-lenders disbursed over N$978 million in loans.
These rather worrying numbers were released by the Namibia Financial Institutions Supervisory Authority (Namfisa) recently and portray a country that is painted with borrowers.
The 229 990 people are at least 9% of Namibia’s 2,5 million population.
According to Namfisa, they saw a 21,4% increase between January and March this year alone, with 40 543 people bailed out by micro-lenders during the quarter.
Lenders were extended over 134 391 loan contracts, Namfisa said.
The numbers come at a time when commercial banks are not too popular in dishing out loans, with their numbers only edging up slightly.
At the end of March, commercial bank’s loans to households stood at N$60,7 billion, with over 75% of that tied in mortgages and other assets financing.
The micro-lenders are almost catching up with commercial banks, who had a combined unsecured lending through personal loans at the end of March standing at N$7,3 billion. Micro-lenders are at N$6,6 billion, and with the rate at which the balance is growing, they could surpass the loan category of the banks soon.
The micro-lending space is mainly dominated by Letshego Namibia, followed by Entrepo.
Namfisa said the majority of the loans are taken up by workers who live pay cheque-to-pay cheque.
“The increase (in new loans by micro lenders) was driven by the transactions of both the term and payday lenders,” said Namfisa.
For term-lenders, the average amount extended was N$27 298, while that for the payday-loan lenders it was N$2 298.
Recently, after its first sitting, the national macro-prudential oversight committee said despite these high debt amounts, and the number of people affected, the financial system remains “resilient, solvent and sound, despite the Covid-19 pandemic and otherwise challenging economic conditions”.
The central bank’s spokesperson, Kazembire Zemburuka, also noted that although indebtedness is high, it does not really affect the country’s financial stability.
“The latest available figures show that household debt to disposable income stood at 89,1%. At face value, a higher ratio of household debt to disposable income does not bode well for the stability of the financial system, however, it largely depends on the type of debt.”
Giving rather recent numbers, Zemburuka said in May 2021, 69,4% of household debt was attributed to mortgage lending, while overdrafts, instalment and leasing, and other loans and advances collectively contributed 30,6% of household debt.
“This means that most household debt is collateralised thus putting the banks in a favourable position to recover a significant amount, if not all, of the debt in the case of default. In this context, an increase in household indebtedness does not pose a significant risk to financial stability. However, a growth in unsecured lending would not augur well for financial stability because it can have a significant negative impact should it materialise,” he said.
Micro-lenders are known to charge ridiculously high interest rates, and Namibian commercial banks have become partakers in that space.
According to a recent PSG Namibia update, credit extended to the private sector ticked slightly in June to 2,7%.
Growth in total credit extended to businesses was at 0,7%, while growth in credit extended to households remained stable at 4%.
The repo rate is still at 3,75%, and the prime rate is 7,5%. Analysts have said there is no indication of a possible move in the rate anytime soon.
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