Shafudah calls for review of debt laws to fix interest rates

Namibia’s legal framework on lending rates is under renewed scrutiny after finance minister Ericah Shafudah said interest charges remain fixed in law even as household debt continues to rise.

Speaking before parliament’s standing committee on economy, industry, public administration and planning in Windhoek last week, Shafudah said the weaknesses in the credit system make over-borrowing easier.

She added that payday loans remain capped at 30%. At the same time, term lending is set at twice the prime rate.

“Interest rates are prescribed in law, and that is the current position," the finance minister said.

"To lower them, we need to amend the law. For now, and I believe this is why Namfisa has consistently stated it, the rate for day-term (payday) loans is 30%, while term lending is set at prime multiplied by two. These are the areas that need to be reviewed,” she said.

Shafudah said discussions are underway to explore ways to reshape banking charges to promote a savings culture.

“In fact, in discussions involving the Bank of Namibia, some schools of thought suggest that instead of charging customers when they deposit money, banks should consider charging when customers withdraw funds," Shafudah said.

She said the idea is that deposits should be incentivised to encourage saving, which in turn supports lending and contributes to the economy.

"Withdrawals, on the other hand, could carry a small penalty to promote a savings culture. These are some of the discussions currently taking place as we explore ways to improve this area.”

Bypassing the system

The finance minister acknowledged that behavioural patterns and fragmented systems are undermining safeguards meant to prevent excessive debt.

“However, we also understand that human behaviour often differs from what the law intends. While the law sets limits, individuals sometimes try to bypass the system,” she said.

“For example, an employee may fail to disclose existing loans when applying for additional credit, especially because systems are not interconnected. This lack of integration is one of the key deficiencies.”

Shafudah warned that delays in commercial bank approvals are also exploited.

“When an employee applies for a loan from a commercial bank, the bank takes time to conduct due diligence. However, during that period, the same employee may approach a microlender for another loan, for instance, to cover expenses such as a family wedding."

She said by the time these debts are combined, the individual may have already exceeded the allowable threshold.

Mind the gap

Shafudah admitted Namibia still lacks a unified debt-tracking system.

“At present, such a system does not fully exist," she noted, adding that the lack of integration between systems allows individuals to take advantage of the gaps.

"Currently, systems remain fragmented. The Bank of Namibia manages some, the finance ministry manages others, while lenders themselves do not always provide real-time data. This is an area that requires improvement.”

Meanwhile, the Namibia Financial Institutions Supervisory Authority (Namfisa) says Namibia’s cash loan market reached N$7.5 billion in December, while total household debt stood at N$78 billion by December 2025. Microlending accounted for about 9% of total household debt.

Historical data cited in the discussion show that debt pressures have persisted for years. In 2019, 238 640 borrowers owed N$6.5 billion to microlending institutions, according to Namfisa’s annual report.

Shafudah said consultation on possible reforms has involved microlenders, associations and other stakeholders, but trade unions will also be engaged before any final decisions are taken.

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