People Stoop Under Spending Hangover By Mbatjiua Ngavirue WINDHOEK There is growing concern over the high level of personal debt among Namibian consumers following a Christmas spending binge of splurging on expensive Christmas gifts, holidays, new clothing and lavish meals. Many have woken up with a massive debt hangover with barely enough cash to make it through January and a mountain of debts they somehow have to pay. What makes the situation more painful is another threatened interest rate hike expected to take place in mid-February. Consumers are already reeling from four separate interest rate hikes in 2006, which combined raised average interest rates by two percent. When announcing the fourth rate hike in December last year the Deputy Governor of the Bank of Namibia, Paul Hartmann, indicated the interest rates were starting to tame spending but that more strong medicine might be needed. Ebben Kalondo, Corporate Communications and Consumer Education and Protection Officer at the Namibia Financial Institutions Supervisory Authority, shares the view that consumer debt is too high, although she said there is no baseline data available that shows the exact levels of indebtedness among Namibians. Kalondo however felt the increasing number of default judgements in favour of micro-lenders and other credit and service providers are a good indication of excessive debt levels. “If there is another increase in the interest rate it means credit is going to be more expensive and people’s disposable income will be reduced. People will have no other choice but to tighten their belts,” she said. She further warned Namibians to expect sharp rises in the price of essential foodstuffs in 2007, meaning everyone will take an additional financial knock. What is not clear though are the exact reasons for the high levels of personal debt. Some blame excessive consumption by the public, while others blame irresponsible lending by credit providers. The Namfisa spokesperson agreed that in many cases it is far too easy to get credit. “But we also have a culture of increasing consumerism, and a growing culture of measuring people’s success by material possessions. “People use much of the credit they accumulate for consumption, and not for important things like sending children to school,” she complained. She also criticised the lack of a savings culture in Namibia, saying that ultimately we are all just living beyond our means. Kalondo did not want to generalise by accusing banks, micro-lenders and other business of irresponsible lending. “Credit is a profit-driven business. No one gives credit for the love of God, but all lending should be responsible,” she appealed. There is, nevertheless, no doubt that there are some questionable market practices, she said, questioning how it is that someone who cannot afford to go into debt still receives credit. Namfisa feels that to solve the problem of excessive personal debt people have to look at the root causes. The financial supervisory authority says it has developed a consumer education strategy geared to empower Namibian consumers with the knowledge to make informed decisions regarding financial services and products. There is one simple thing consumers can do to get out of debt, Kalondo said, and that is to be open and honest in their assessment of what they have, and what the extent of their debt burden is. “You have to devise a plan to pay off your debt. Talk to your creditors and make arrangements within your means to pay what you owe. Creditors should also give those people who are serious about paying that extra measure of faith,” she advised. The majority of consumer debt is believed to be mainly retail debt for items such as clothing, furniture and appliances. Most of it is hire-purchase debt as well as indebtedness to micro-lenders that can now be found on almost every street corner. Kalondo explained that many people have exhausted the channels to formal credit providers, with desperation now driving them to moneylenders. With regard to micro-lenders, she advised people to shop around, and go to different micro-lenders to find out what their interest rates as well as other charges and fees are. She urged consumers to ask micro-lenders to explain what they are signing, and warned people to never, never sign a blank form. “If you do not understand what you are signing, ask for a second opinion. They are also more than welcome to call Namfisa so that we can explain to them what their rights are,” Kalondo said.