A watchdog of NAMIBIA’s financial institutions, Namfisa has collected over N $ 120 million in withdrawals from microlenders, commonly referred to as cash loans, over the past three years.
This makes micro-lenders the regulator’s second-largest source of revenue – around 21% of the N $ 566 million earned.
What Namfisa earns from these entities is more than what pension funds (5.6%), medical aid funds (2.58%), mutual funds (13%) and companies. long-term insurance (18%) pay in direct debits – despite micro-lenders with the lowest balance sheet values.
There are, however, many micro-lenders, which could explain why these direct debits are the cornerstone of the regulator.
In FY2021 alone, although the microcredit sector experienced a contraction in lending, microlenders paid Namfisa over N $ 43 million in direct debits.
It was more than all the other players in the industry, such as pension funds and the stock market, paid.
Some 350 microlenders were registered with the regulator at the end of 2020, compared to 423 declared for 2019.
These micro-lenders had 516,970 active loans at the end of last year with a combined value of N $ 6 billion.
Namfisa says it charges an annual rate equal to 1.03% on the total amount of disbursed loans and this is what brought in the N $ 43 million until the end of March of this year.
For 2020, microloans have disbursed loans to the tune of N $ 4 billion.
The Namibian has received several reports that micro-lenders have overextended their loans to people who are not creditworthy.
This has created a loan life cycle – a credit trap that many Namibians are unable to escape.
Namfisa says he also received such reports and explained that the law prohibits micro-lenders from granting loans without an affordability assessment having been carried out.
The said law further prohibits microlenders from granting a loan to a person who already has an existing loan, unless the assessment of the affordability of the loan application clearly demonstrates the ability of the loan applicant or borrower to repay the additional loan, taking into account all his or her existing obligations, âexplains Victoria Muranda, spokesperson for the regulator.
In the event that the micro-lenders break the law, Muranda says the micro-lender would have been found to have committed an offense and would be liable, on conviction, to a fine of not more than N $ 500,000 or a sentence of death. ‘imprisonment not exceeding five years, or both.
The microcredit space is dominated by Letshego Financial Services Namibia and Entrepo Namibia.
Muranda says that in fiscal 2021, which ended in March of this year, 42 unregistered micro-lenders were reported to their offices.
The unregistered entities reported were urged to repay borrowers and to cease and desist from illegal microcredit activities, she said.
It is not clear whether there have been any arrests or fines imposed according to the law, she said.
Namfisa has been accused of treating microlenders with gloves over time, especially those known to have actively abused lending practices.
In June of this year, the Bank of Namibia said Namibians were borrowing too much.
According to the central bank, data for 2021 showed household debt to disposable income to stand at 89.1%.
This means that an average Namibian household has only 10% of their disposable income after servicing their debts.
Muranda says the public is encouraged to report unregistered microlenders and those registered, but lending above what is affordable.
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