Namfisa, NAMIBIA’s financial regulator, has raised over N $ 120 million in donations from micro-lenders, commonly known as cash advances, for the past three years.
This makes microcredit lenders the regulator’s second largest source of revenue – approximately 21% of the N $ 566 million earned.
What Namfisa makes from these companies is more than what pension funds (5.6%), health insurance funds (2.58%), mutual funds (13%) and long-term insurance companies (18%) pay in dues – although micro-lenders have the lowest balance sheet values .
However, there are plenty of micro-lenders out there, which may explain why these levies are the regulator’s lifeblood.
For fiscal 2021 alone, micro-lenders paid Namfisa over N $ 43 million in levies, despite the micro-credit sector seeing a decline in lending.
That was more than all other industry players like pension funds and the stock market paid.
At the end of 2020, around 350 micro-lenders were registered with the regulator, compared with 423 reported for 2019.
These micro-lenders had 516,970 active loans totaling N $ 6 billion at the end of last year.
Namfisa says it charges an annual rate of 1.03% on the total amount of loans disbursed, which raised N $ 43 million by the end of March this year.
For 2020, micro-lenders disbursed N $ 4 billion in loans.
The Namibian has received several reports that micro-lenders have inflated loans to uncredited individuals.
This has created a cycle of life with credit – a credit trap that many Namibians cannot escape.
Namfisa says it has received reports like this as well, stating that there is a law prohibiting micro-lenders from lending without conducting an affordability assessment.
“Said law also prohibits micro-lenders from lending to a person who already has an existing loan, unless the loan application affordability test clearly shows the loan applicant or borrower’s ability to obtain the additional loan, taking into account all of his or her existing obligations, “says Victoria Muranda, spokeswoman for the regulator.
If microcredit lenders break the law, Muranda said, the microcredit lender would have been deemed a criminal offense and, if convicted, would face a fine of up to N $ 500,000 or a prison term of up to five years. or both.
The microcredit area is dominated by Letshego Financial Services Namibia and Entrepo Namibia.
Muranda says that in fiscal 2021, which ended in March this year, 42 unregistered micro-lenders were reported to their offices.
The reported unregistered businesses have been ordered to reimburse borrowers and stop conducting illegal microcredit deals, she says.
It is not clear whether there have been arrests or fines under the law, she says.
Namfisa has been accused of gloating over microcredit lenders, particularly those known to have actively abused lending practices.
In June this year, the Bank of Namibia said the Namibians are borrowing too much.
According to the central bank, data for 2021 showed that household debt as a percentage of disposable income was 89.1%.
This means that an average Namibian household only has 10% of their disposable income left after servicing their debt.
Muranda says the public is encouraged to report unregistered micro-lenders and those who are registered but offer loans above affordable rates.