A watchdog of NAMIBIA’s financial institutions, Namfisa has earned over N$120 million in levies from microlenders, commonly referred to as cash loans, over the past three years.
This makes microlenders the regulator’s second largest source of revenue – about 21% of the N$566 million earned.
What Namfisa earns from these entities is more than pension funds (5.6%), medical aid funds (2.58%), unit trusts (13%) and insurance companies to long-term (18%) pay in direct debits – although microlenders have the lowest balance sheet values.
There are, however, many microlenders, which could explain why these levies are the cornerstone of the regulator.
In fiscal 2021 alone, although the microcredit industry saw a contraction in lending, microlenders paid Namfisa more than N$43 million in levies.
It was more than everyone else in the industry, such as pension funds and the stock exchange, paid.
Some 350 microlenders were registered with the regulator at the end of 2020, compared to 423 reported for 2019.
At the end of last year, these microlenders had 516,970 active loans worth a combined N$6 billion.
Namfisa says it charges an annual rate equal to 1.03% on the total amount of loans disbursed and that is what brought in N$43 million at the end of March this year.
For 2020, microlenders have disbursed loans of N$4 billion.
The Namibian has received several reports that microlenders have given excessive loans to people who are not creditworthy.
This has created a loan life cycle – a credit trap from which many Namibians are unable to escape.
Namfisa says she has also received such reports and explained that the law prohibits microlenders from providing loans without financial capacity assessments being conducted.
“The said law further prohibits microlenders from extending a loan to a person who already has an existing loan, unless the accessibility assessment 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,” said Victoria Muranda, spokeswoman for the regulator.
In the event that the microlenders broke the law, Muranda says the microlender would be deemed to have committed an offense and would be liable, if convicted, to a fine not exceeding N$500,000 or to 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 year 2021, which ended in March this year, 42 unregistered microlenders were reported to their offices.
Unregistered entities reported have been instructed to repay borrowers and to cease and desist from illegal microcredit activities, she says.
It is unclear whether there were any arrests or fines imposed according to law, she said.
Namfisa has been accused of treating microlenders with gloves over time, especially those known to actively abuse lending practices.
In June 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 stood at 89.1%.
This means that an average Namibian household has only 10% of its disposable income left after paying off its debts.
Muranda says the public is encouraged to report unregistered microlenders and those registered but lending beyond what is affordable.