27 November 2012

Namibia: NAMFISA Surrenders ATM Cards

Windhoek — Hundreds of automated teller machine (ATM) cards and their personal identification numbers (PINs) - recently confiscated from cash loan businesses - have been returned.

The Namibia Financial Institutions Supervisory Authority (Namfisa) seized the cards and the PIN numbers from cash-loan companies but was ordered to hand back the cards and PIN codes.

The cards have since been returned to the respective businesses after the Micro-lenders Association of Namibia (MLA) challenged the action. The association that represents 50 micro-lenders with more than 130 branches throughout the country, remains steadfast that it has no option but to retain customers' cards and PIN codes until an alternative payment method is developed.

"The restriction regarding the employment of cards and PIN, although repeated under subsequent exemption notices, was not enforced by the authorities. Everyone in the industry, including the regulator, agreed that until another payment or mechanism is available, cards and PINs are the only viable and realistic collection method," said Ronald Weber, the chairman of the MLA.

Micro-lending, or cash loans, is one of the fastest growing sectors in Namibia's financial industry and refers to loans under N$50 000, which must be repaid over a maximum period of 60 months, usually in fixed monthly installments.

Interest rates at micro-lenders, which are about 30 percent per month, are much higher than commercial bank rates since micro-lenders provide funds over a shorter period and they are at a greater risk of carrying 'bad debts' if their customers fail to pay.

According to the MLA's Weber, there is currently no viable alternative repayment method for cash loans in Namibia's financial or banking system. The MLA is adamant that an alternative repayment method must be facilitated under Namibia's banking payment system.

"The MLA's consistent efforts to bring about the required development in our payment system - much on the basis established in South Africa with a highly successful time sensitive system, with enhancements to suit Namibia's needs - have been in vain so far. Until such an alternative is established, short-term borrowers for loans in the amounts for which micro-lenders can lend to members of the public in terms of the exemption notice have no other viable method to conduct their business and to provide the services so many people do, as a matter of fact, need and depend on.

"As micro-lenders we therefore will have to continue to accept the position of our clients and rely on cards and PINs as a payment method," said Weber.

The total number of micro-lenders increased by 11.8 percent during the last financial year to a total of 388. Of the registered lenders, 382 are payday lenders, while the remaining six are term lenders.

Credit extended by micro-lenders increased by 36.5 percent to N$1.5 billion during 2011, compared to an increase of 20.5 percent during 2010.

Of the total credit extended, payday lenders extended 36 percent and term lenders 64 percent by value. However, payday lenders extended 85 percent of loans by volume, indicating that most of the borrowers require bridging loans to supplement income on a monthly basis.

During the first quarter of this year alone, micro-lenders extended loans of close to N$1.8 million to the Namibian public. Payday lenders are those who grant credit for a period of up to 30 days, while term lenders extend credit for a period of between 6 and 24 months.

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