Popular Democratic Movement parliamentarian Inna Hengari on Tuesday moved a motion to discuss and find a
lasting solution to the mushrooming "backyard loan sharks", and their clients' inability to escape the debt trap.
She said lending institutions make vast profits, while ordinary people, mostly civil servants, are consistently drowning in debt.
"The growing debt crisis among Namibians, particularly civil servants, is a matter of urgent concern. Many are struggling to repay loans, which is not only a personal burden, but a threat to the
wider economy. When a significant portion of the population is in debt, it weakens the entire financial system," she cautioned.
The number of new loans issued in Namibia during the first quarter of 2024 increased by almost 10% to 166 452.
This represents a quarter-to-quarter increase of 9.8%, and a 16.1% increase year-on-year (y/y).
The Namibia Financial Institutions Supervisory Authority (Namfisa) earlier this month reported that "regarding the distribution of new loans, payday lenders dominated, issuing 83% of all new loans, and term lenders accounted for the remaining 17%".
Payday lenders provide very short-term, high-cost loans, while term lenders offer longer-term, lower-interest financing.
The loan book value in the microlending industry increased by 7.9% y/y, reaching a staggering N$7.2 billion.
Term-lender loans continued to dominate, with a 0.7% quarterly reduction and a 7% y/y increase, totalling N$6.8 billion.
Term-lenders' loans made up 95% of the overall share.
Namfisa stated that the cumulative number of household borrowers turning to micro-
lending transactions increased by 3.5% y/y by the end of the first quarter of 2024, reaching a total of 224 124.
This growth was primarily observed among borrowers using term lenders.
The average disbursement
value for term lenders stood at N$22 938, and the average disbursement value for payday lenders amounted to N$2 921.
"By having this debate, we aim to reform laws, regulate lending practices and promote sustainable economic development that benefits all Namibians. It's about securing a financial system that works for everyone - not just a few," she emphasised.
Hengari further expressed concern that Namibians are increasingly taking out loans which exceed their ability to repay.
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"This results in defaults, which harm both individuals and lenders, further destabilising the economy. The situation is worsened by stagnant salaries and the rising cost of living, forcing many to rely on credit just to meet basic needs," she said.
Hengari maintained that the rise of informal loan sharks, who charge outrageously high interest rates and prey on the most vulnerable, has also pushed people into cycles of debt, from which it is almost impossible to escape.
Meanwhile, the Bank of Namibia and Namfisa earlier this year showed that household debt-servicing costs almost doubled from 2020 to 2022.
"The household debt-servicing costs increased from 9% in 2020 to 17.8% in 2022, reflecting a combination of higher debt levels as well as high interest rates. Although households are highly-indebted, most of their debt is secured lending, with mortgage lending accounting for most of it," reads the financial report released by the two entities.
