HIGH levels of indebtedness among Namibians are worrying financial regulatory authorities including the Bank of Namibia and the Namibia Financial Institutions Supervisory Authority (Namfisa).
Yesterday, Namfisa CEO, Phillip Shiimi said the 'indebtedness of Namibian people is increasingly becoming a cause for concern to the institution.'
Shiimi said consumers must to live within their means and avoid unnecessary stress caused by high levels of debt.
In its latest Monetary Policy Statement, the Bank of Namibia reported that the annual growth rate in domestic private sector credit increased to 15,8% in April 2014, compared to 14,3% in December 2013. In addition, growth in private sector credit resulted from higher demand by both individuals and businesses.
"The rise in household credit largely reflected strong growth in installment credit and overdraft loans. Furthermore, loan disbursements by microlenders for the calendar year ending 31 December 2013 have increased to N$2,2 billion, up with a staggering 41% when compared to loan disbursements for the same period in 2012. This state of affairs regarding debt is indeed worrying to Namfisa," said Shiimi.
With this situation in mind, Shiimi encouraged Namibians to live within their means so as not to fall into the debt trap.
He said when people borrow money from financial institutions, including microlenders, they must at least use this money for productive purposes such as investing in assets that will yield results that are beneficial to the Namibian economy and individuals' financial positions.
The Bank of Namibia said that inflation has shown an upward trend for the past five months.
Annual inflation, according to the bank, rose from 4,9% in December 2013 to 6,1% in May 2014, mainly due to increases in food and transport prices.
"With inflation on an upward trend, consumers are encouraged to create sufficient savings to serve as a buffer to fend off the effect of expected higher prices and rising interest rates. This will avoid them getting deeper into a debt trap. This will also prevent premature termination of insurance policies and cashing in on pension/retirement savings," Shiimi said.
He said despite the fact that the cost of living in Namibia is rising, Namibians should be encouraged to engage in activities that create wealth for themselves and the nation at large.
The limited resources available in Namibia should be channeled to sectors that promote economic growth rather than borrowing for consumption only, he said.
"Consumers should not rely heavily on debt but they should also be prepared to save money to be used when it is necessary, that is at the time when they will no longer be able to generate their own income or sufficient income for that matter.
"Namfisa thus encourages borrowing for investments and self-sustainability purposes, " he said.
Shiimi has also called on civil society and mass-based organisations to educate their members and stakeholders about the need to cut down on their lifestyle expenses.
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