At the end of March this year, 229,990 Namibians were indebted to micro-lenders (cash loans) and owed a colossal sum of N$6.8 billion.
Between January and March alone, microlenders disbursed over N$978 million in loans.
These rather worrying figures were released recently by the Financial Institutions Supervisory Authority of Namibia (Namfisa) and paint a picture of a country that is painted with borrowers.
The 229,990 people represent at least 9% of Namibia’s 2.5 million people.
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 were stretched over 134,391 loan deals, Namfisa said.
The figures come at a time when commercial banks aren’t too popular for lending, with their numbers rising only slightly.
At the end of March, commercial bank loans to households amounted to N$60.7 billion, of which more than 75% was related to the financing of mortgages and other assets.
Micro-lenders are nearly catching up with commercial banks, which at the end of March had total unsecured lending through personal loans of N$7.3 billion. Micro-lenders are at N$6.6 billion, and with the rate at which the balance is growing, they could soon overtake the lending category of banks.
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 paycheck.
“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 session, the national macro-prudential surveillance committee declared that despite these high debt amounts and the number of people involved, the financial system remains “resilient, solvent and healthy, despite the Covid-19 pandemic. and otherwise difficult economic conditions”. “.
Central bank spokesman Kazembire Zemburuka also noted that although indebtedness is high, it does not really affect the country’s financial stability.
“The latest figures available show that household debt to disposable income stood at 89.1%. On the face of it, a higher ratio of household debt to disposable income does not bode well for stability. of the financial system, but it largely depends on the type of debt.”
Giving fairly recent figures, Zemburuka said in May 2021 that 69.4% of household debt was attributed to mortgages, while overdrafts, installments and leasing, and other loans and advances collectively contributed to 30.6% of household debt.
“This means that most household debt is secured, which puts banks in a favorable position to recover a significant part, if not all, of the debt in the event of default. In this context, an increase in indebtedness of households does not pose a significant risk to financial stability. However, a growth in unsecured lending does not bode well for financial stability, as it may have a significant negative impact if it materializes,” a- he declared.
Micro-lenders are notorious for charging ridiculously high interest rates, and Namibian commercial banks have become stakeholders in this space.
According to a recent update from PSG Namibia, credit to the private sector fell slightly in June to 2.7%.
Growth in total credit granted to businesses was 0.7%, while growth in credit granted to households remained stable at 4%.
The repo rate is still at 3.75% and the prime rate at 7.5%. Analysts said there was no indication of a possible rate move any time soon.
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