Parliament hears how loans ‘bankrupt’ workers

Senior officials in the Oshana region have raised alarm over exploitative lending practices that are pushing Namibians, especially civil servants, into financial ruin.

Speaking during a public hearing of the National Assembly standing committee on economy and industry, public administration and planning in Oshakati on Monday, leaders painted a grim picture of households surviving on a fraction of their salaries due to multiple loans.

The hearing is part of parliament’s investigation into a motion to explore whether existing laws protect Namibians from exploitation by lending institutions and informal money lenders.

Abel Mazila, chief development planner at the Oshana Regional Council, directly called on the Namibia Financial Institutions Supervisory Authority (Namfisa) to be held accountable.

He argued that while laws exist to protect consumers, enforcement has been neglected.

“If my payslip reaches maximum capacity, I think regulatory institutions should be able to say ‘here, we can’t’, regardless of profit or business," he said.

"It is sad when you see a person earning a net of N$16 000 and what lands in their account is N$500. Who do we blame here? It should be the regulator,” Mazila said.

Mazila also raised concern over the profitability of the micro-lending sector.

“Looking at the loan book of micro-lenders, it’s in the billions. It is one of the most lucrative industries, yet the borrower remains in debt," he added.

Mazila proposed that a study be done to identify which professions and regions borrow the most and why.

“If the study is made, then financial literacy should be provided to those who lack understanding to reduce borrowing. I know a lot of people borrow to solve problems, but it affects their cash flow,” he said.

Mazila further criticised interest rates on home loans, saying they make home ownership unattainable.

“A house may be valued at N$1 million, but borrowers are often required to repay N$2 million," he said. "This results in a 100% recovery rate. Why not aim for 60-70%? This practice resembles colonialism and needs to be reviewed,” he stressed.

Drivers of debt

Timoteus Shivute, regional councillor for Uuvudhiya constituency, said financial institutions must invest in public awareness programmes on financial management.

He identified three key drivers of borrowing: limited income, lack of qualifications or suitable employment and poor spending habits.

“Some, upon receiving their salaries, spend excessively on alcohol, culminating in them resorting to cash loans to meet their needs,” Shivute said.

Committee chairperson and former finance minister Ipumbu Shiimi said the 24-member committee has been tasked by the National Assembly to gather public views, particularly from civil servants, before reporting back to parliament.

He revealed the extent of the crisis discussed in parliament.

“There has been a debate that the Namibian population is highly indebted. Many families go home with a take-home pay of N$1 500 or less, although they had a salary of N$10 000 due to too many loans,” Shiimi said.

He warned that some die by suicide or consider suicide as a result of debt and some are so stressed they cannot perform productively at work. “This is a problem society cannot be left alone with,” he said.

Shiimi urged members of the public to participate in similar hearings being held in ||Kharas, Omaheke and Erongo regions.

“We can’t be in all regions, but when you get the opportunity in a neighbouring region, please attend and submit your contribution,” Shiimi added.