Staff Reporter
Windhoek-The Bill to strengthen the regulation of cash loans and moneylenders was tabled in the National Assembly yesterday.
Until now micro-lenders have operated with virtually very little regulatory enforcement, and on the fringes of the banking and non-banking financial moneylending market, despite the fact that Namibian micro-lenders sat on a capital base of N$4.4 billion as of 2017.
In layman’s language the N$4.4 billion is the total amount of money in the hands of only 304 registered cash loans and micro-lenders in the country as of 2017, and which they use to advance loans to people desperate for money but would not get the attention of a financial bank or institution.
Statistically each of the cash-loan businesses holds about N$14.5 million in capital. Further, the total capital base equates to 2.7 percent of the Namibian economy, or the gross domestic product, which as of 2016 was valued at N$161.03 billion.
Yet despite the sector’s significant role in the economy, its supervision is lacking to an extent that cash-loan businesses get away with very unscrupulous practices of confiscating borrowers’ national identity documents and ATM PIN numbers, as surety for money borrowed. Also, cash-loan operators are under no obligation to ensure that the borrower is in a position to afford the loan and the payment schedule.
When tabling the Bill in parliament yesterday, Finance Minister Calle Schlettwein noted that “in spite of serving this relatively large market segment, market conducts such as the retention of personal identification numbers (PINs) as well as the provision of loans without conducting affordability assessments lead to a vicious cycle of over-indebtedness which further fuels vulnerability.”
According to the figures by Schlettwein there are 284,000 clients with micro-lenders, which is 42 percent of Namibia’s total employment population at 677,000 as of 2016.
The new Bill gives the Namibia Financial Institutions Supervisory Authority (Namfisa) more teeth to deal with cash-loan businesses. For instance, the Bill makes it an obligation for micro-lenders to first determine whether or not the person borrowing the money can afford that loan. “Providing a loan to a borrower without conducting affordability and assessment is prohibited,” just as would be the “retention of [bank] card and PIN as well as original personal identification documents.”
Further the Bill “introduces penalties for non-compliance with the regulatory requirements and empowers the regulator to impose and enforce conditions which enhance the highest conditions of business conduct”.
Also gone are the days when a cash-loan owner would operate from the comfort of the bedroom, or boot of a car, as the Bill requires that each micro-lender have a principal office in Namibia. Cash-loan owners would be required to regularly submit returns to the regulator and contribute to the payment of levies in line with the practice of all industries in the non-banking financial sector.
Namfisa now also has the power to carry out inspections on micro-lenders to enforce the set regulations and standards.
Schlettwein says the significance of the Bill “lies in providing for a primary legislation for micro-lending businesses and making provision for responsible lending and borrowing. It provides for appeal mechanisms for complaints.”
The Bill also places responsibility on the borrowers from micro-lenders, and promotes public awareness and understanding of the micro-lending industry.
The minister says the micro-lending industry has been “severally consulted during the formulation of the Bil, and the concerns raised regarding the recent review of the levies payable by the industry have been addressed.”