Namibia: Cash Loan Start-Ups On the Rise

12 February 2020

The number of applications from individuals and businesses seeking to set up microlending companies is increasing, with almost 50 applications approved in nine months.

In the latest Namibia Financial Institutions Supervisory Authority (Namfisa) quarterly report, the cash loans regulator says from the last quarter of 2018 to the second quarter of 2019, it assessed and approved 48 new micro-lending applications.

This shows that Namibians are increasingly hungry for monthly debt and living hand-to-mouth is scarily becoming the norm.

A quick analysis shows that Namfisa approved 14 or more applications to set up microlending businesses around the country every three months

The number of registered microlenders, as of 30 June 2019 was 381, up from 368 in the first quarter of 2019. Microlenders make up 58% of all non-banking financial institutions under Namfisa's fold.

Namfisa does not explain why there is an increase in the microlenders in its quarterly report.

During the reporting period, the cumulative number of household borrowers that benefited from the microlending transactions stood at 223 408 at the end of the second quarter of 2019.

The number of new loans disbursed by micro-lenders countrywide increased quarterly up to the end of the second quarter of 2019, driven by both long-term and payday loans.

The microlenders' loan book stood at N$6 billion at the end of the second quarter of 2019, a decline from N$6,2 billion in the previous quarter.

The loan book is mainly dominated by term loans valued at N$5,9 billion, with payday loans taking up the remainder.

Quarterly, new loans disbursed increased by 5,9% to N$936,1 million from N$871 million.

The value of new loans extended by term lenders and payday lenders averaged N$25 500 and N$1 670, respectively.

The authority also cancelled six microlender licences during this period for contravening microlending laws. According to Namfisa, microlenders are the leading culprit in terms of non-compliance.

"As for microlenders, the non-compliance ordinarily pertains to non-submission of returns, non-payment of levies and a history of non-compliance such as failure to respond to inspection findings, failure to implement remedial actions emanating from inspections and dormancy," Namfisa said in the report.

On compliance issues, microlenders are also dominating in terms of consumer complaints, with 104 in the second quarter of 2019.

Parliament will start discussing a law [the financial institutions and markets (FIM) bill] aimed at ensuring that the public and consumers of financial services understand the contracts they sign with financial institutions, especially cash loan firms.

The resolution of complaints resulted in consumers receiving a total of N$90 200 from these financial institutions, of which these payments broadly relate to wrongful deductions.

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