Namibia: Nam Micro-Loans Reach ‘Alarming’ Proportions
By Jo-MarÉ Duddy, The Namibian
BY the end of last year, Namibians owed registered micro-lenders in the country in excess of N$1,5 billion, about 34 per cent more than they owed them at the end of 2010.
The latest figures released by the Namibia Financial Institutions Supervisory Authority (Namfisa) are a cause for concern, economists said.
“Micro-lending is growing faster than short-term borrowing at banks and I would suspect that this money is used to finance consumption expenditure,” Namene Kalili, FNB Namibia’s research and competitor intelligence manager, said yesterday.
Simonis Storm Securities analyst Rudolf Kuschke said total micro-lending at the end of 2011 represented about 3,4 per cent of total credit advanced by commercial banks. As such, the amount is relatively small.
However, if the micro-lending trend continues, this percentage could be close to four per cent at the end of 2012 and five per cent by the end of 2013, he said.
“So the rate at which micro-lending is currently growing, is clearly alarming,” Kuschke said.
Namfisa’s figures for micro-lending in the fourth quarter of 2011 follows on Bank of Namibia (BoN) Governor Ipumbu Shiimi last week frowning on consumers’ increased borrowing from commercial banks to fund their lifestyles.
The fourth quarter statistics showed that term-loans – money that has to to be paid off in between six and 60 months at an average interest rate of 22 per cent – remains big business for micro-lenders. Of the N$1,5 billion owned at the end of December, about N$1,44 billion belong to term-lenders.
Loans worth N$286 million were granted to term-lenders in the fourth quarter of 2011 alone. This is an increase of nearly 60 per cent compared to the fourth quarter of 2010.
In contrast, pay-day lenders – those who have to settle their loans at month-end at an average interest rate of 30 per cent – have been declining. By the end of last December, pay-day lenders owed micro-lenders N$61,6 million, down from the N$62,7 million owed at the end of the previous year.
Registered micro-lenders granted more than 135 000 loans to pay-day lenders during the fourth quarter of last year, while over 25 000 loans to term-lenders were approved.
The average term-lender in the fourth quarter of 2011 borrowed N$11 131, about 39 per cent more than the year before.
The average pay-day lender, on the other hand, borrowed N$970, slightly more than the average N$944 borrowed the year before.