Many people use cash loans to cover an unexpected expense, like an unexpected medical bill or the death of a loved one. But back-to-school expenses and spontaneous festive spending continue to haunt January pockets.
Principal officer at KOBO Cash Loans Namibia, Helena Timoteus, said the business faced challenges from the effects of Covid-19, but managed to pull through.
“At the beginning of the year, the borrowing rate is high and fast because people have overspent during the festive season. Due to the loss of jobs and closed businesses, we could not help employees, apart from government workers. So, it went really down because only a few could be allowed to borrow money,” she explained.
Speaking to a regular cash loan customer, who asked for anonymity because of the stigma on cash loan clients, he said “getting a cash loan is not a bad thing, but obviously it depends on the reasons. Many people are into cash loans, but they are not known because of the confidentiality in the industry”.
He added that he regularly visits cash loans and remains on good terms with them in complying with his payment agreements. According to the customer, cash loan businesses offer a better service for low-income earners like him because he gets to borrow the small amount he needs, and is not expected to provide collateral.
“People with little or no savings represent a natural market for cash loans. I urge people to not badmouth what they do not know. I can testify that with cash loan money, my kid is in school and does not sleep hungry. For me, it is just money like any other. Instead, what the government can do is to give financial literacy collectively to the nation,” he reasoned.
According to Namibia Financial Institutions Supervisory Authority (Namfisa) statistics, the value of the microlenders’ loan book rose on a quarterly basis, but recorded a decline on a yearly basis at the end of the first quarter of 2021.
“The increase was driven by the transactions of both the term and payday lenders, while the decline emanated only from the term lenders. Similarly, the credit extended to the household sector by the banking industry slightly increased by 0.2%, quarter-on-quarter, and by 3% year-on-year to N$60.7 billion at the end of the first quarter of 2021,” they stated.
Namfisa added that the cumulative number of household borrowers rose both on a quarterly basis and yearly basis over the same period.
The number of borrowers increased by 21.4% quarter-on-quarter, and 2% on a yearly basis to reach 229 999 beneficiaries. The quarterly and yearly increase in the number of household borrowers emanated from the category of term borrowers.
The value of the loan book (outstanding value) rose on a quarterly basis by 12.9%, but declined by 8.1% on a yearly basis to N$6.8 billion. Like in the preceding quarters, the value of the loan book continued to be dominated mainly by the stock for the term lenders that stood at N$6.6 billion, accounting for almost 96% of the total share.
“The number of the new loans that were issued increased on a quarterly basis, but declined on a yearly basis to 134 391 loans at the end of the first quarter of 2021,” continued Namfisa.
When asked about the main challenge that they encounter with regards to customers not paying back the money, Timoteus said: “We tend to stop a little, just to wait for those who are paying to enable us to assist new clients. If they take longer than three or five months to pay, then we hand them over to the relevant authorities”.