Banks blame income crisis for Namibia’s household debt

Namibia’s household debt crisis is being driven primarily by an income squeeze, with a median monthly income of about N$4 000 leaving many citizens unable to meet basic living costs without borrowing, Bankers Association of Namibia chief executive Dantagos Naomi Jimmy has said.

Presenting before the National Assembly’s Standing Committee on Economy and Industry, Public Administration and Planning on Friday, Jimmy said income pressure had to be placed at the centre of the debate on household indebtedness, particularly among civil servants.

The committee was considering a motion on whether existing laws adequately protect Namibians from exploitation by lending institutions and informal money lenders.

Jimmy said the cost of necessities had outpaced what many households could comfortably afford, leaving little disposable income and increasing reliance on credit.

“What is really at the root of it is that we have an income crisis,” she said.

She said although inflation had started at relatively high levels in 2016 and had since declined, the cost of living continued to rise.

“Overall, the cost of living for most of our citizens is continuing to increase,” Jimmy said, pointing to food and non-alcoholic beverages, housing, water, electricity, gas, fuel and transport as major sources of pressure.

The mismatch between income and expenditure, she said, was forcing people to borrow to cover basic necessities.

“And in order to manage this, this is where the borrowing comes in because what they have in terms of income cannot cover these basic necessities,” she said.

However, Jimmy rejected suggestions that commercial banks were fuelling over-indebtedness through excessive lending.

She said private-sector credit extension across commercial banking products had generally been declining from 2014 to June 2026, even as household indebtedness remained a concern.

“The argument that the banks may be overextending to the population probably will not hold water at this point in time, even though people are overindebted,” Jimmy said.

She said individual loans and advances and mortgage lending had declined, while individual overdrafts and vehicle and asset financing had increased.

Jimmy described Namibia’s aggregate household debt position as contained, but acknowledged “pockets of significant household financial distress”.

She attributed this distress to income pressure, rising living costs, short-term borrowing, refinancing, loan stacking and inadequate financial buffers.

Civil servants

On civil servants, Jimmy acknowledged that the payroll deduction system could make excessive borrowing easier, but rejected the suggestion that it was the underlying cause of over-indebtedness.

“The payroll deduction system might facilitate excessive borrowing, but it is not by itself the cause of over-indebtedness,” she said.

Public servants are attractive to lenders because their salaries are considered stable, making salary-linked credit relatively accessible. However, Jimmy said the system could be misused when borrowers took out multiple facilities simply because credit was available.

“Just because the mechanism is there, it doesn’t mean that you need to use it to its fullest extent,” she said.

She also identified multiple credit providers, refinancing, loan consolidation, top-up facilities, short-term consumer lending and multiple payroll deductions as factors that could compound household debt.

Jimmy defended commercial banks’ lending assessments, saying they consider income, expenses, disposable income and repayment behaviour before approving loans.

She said lending rates were influenced by monetary policy conditions, with banks pricing off the Bank of Namibia’s reference rates, while individual borrowers could receive different rates based on their risk profiles and other factors.

Jimmy maintained that the regulatory framework governing banks was adequate, but called for greater financial literacy and personal financial discipline.

She said the banking industry was caught in a “catch-22”, facing criticism when it lent to people who subsequently became over-indebted, but also when it tightened lending to consumers who needed access to credit.