As of the end of March this year, 229,990 Namibians were in debt to micro-lenders (cash loans) and owed N $ 6.8 billion.
Between January and March alone, micro-lenders disbursed over N $ 978 million in loans.
These rather disturbing figures were released recently by the Namibia Financial Institutions Supervisory Authority (Namfisa) and portray a country painted with borrowers.
The 229,990 people represent at least 9% of Namibia’s 2.5 million inhabitants.
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 in the quarter.
Lenders have granted more than 134,391 loan contracts, Namfisa said.
The numbers come at a time when commercial banks are not very popular in lending, with their numbers only increasing slightly.
By the end of March, commercial bank loans to households amounted to N $ 60.7 billion, over 75% of which was tied to financing mortgages and other assets.
Micro-lenders are almost catching up with commercial banks, which at the end of March had a combined unsecured loan through personal loans amounting to N $ 7.3 billion. Micro-lenders are at N $ 6.6 billion, and with the rate at which the balance grows, they may soon overtake the bank lending category.
The microcredit space is mainly dominated by Letshego Namibia, followed by Entrepo.
Namfisa said the majority of loans are taken out by workers who live paycheck to check.
“The increase (in new loans from micro-lenders) was driven by transactions from term and payday lenders,” Namfisa said.
For term lenders the average amount granted was N $ 27,298, while for payday lenders it was N $ 2,298.
Recently, after its first meeting, the national macro-prudential oversight committee said that despite these high amounts of debt and the number of people affected, the financial system remains “resilient, solvent and strong, despite the Covid-19 pandemic and otherwise difficult economic conditions. ”.
Central bank spokesman Kazembire Zemburuka also noted that although debt is high, it does not really affect the country’s financial stability.
“The latest figures available show that household debt on disposable income stood at 89.1%. At first glance, a higher ratio of household debt to disposable income does not bode well for the stability of the financial system, however, it depends largely on the type of debt. “
Giving fairly recent figures, Zemburuka said in May 2021, 69.4% of household debt was attributed to mortgages, while overdrafts, down payments and leasing, and other loans and advances collectively accounted for 30. 6% of household debt.
“This means that most household debt is secured, which puts banks in a good position to collect a significant portion, if not all, of the debt in the event of default. In this context, an increase in household indebtedness does not present a significant risk for financial stability. However, a growth in unsecured loans would not bode well for financial stability, as it can have a significant negative impact if it materializes, ”he said.
Micro-lenders are known to charge ridiculously high interest rates, and Namibian commercial banks have become participants in this space.
According to a recent update from PSG Namibia, credit to the private sector edged down in June to 2.7%.
Growth in total credit to businesses stood at 0.7%, while growth in credit to households remained stable at 4%.
The repo rate is still at 3.75% and the prime rate is 7.5%. Analysts said there was no indication of a possible rate move anytime soon.
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