New law regulates micro-loans
Cash-loan businesses to register annually as compliance with new law is enforced.
AUGETTO GRAIG
Micro-lenders and cash-loan providers must register with Namfisa (Namibia Financial Institutions Supervisory Authority) annually now that Micro-lending Act has come into force since 15 October 2018.
The authority says micro-lenders who do not fully comply with the new act face deregistration and possible penalties up to N$100 000.
The main purpose of the new law is to regulate and supervise micro-lending business in Namibia, to establish an effective and consistent enforcement framework relating to micro-lending and to promote responsible borrowing and lending.
It is now the principal legislation governing micro-lending transactions and the affairs of micro-lending businesses in the country.
Previously micro-lending in Namibia was regulated in terms of the provisions of the Usury Act of 1968 and the Exemption Notice issued thereunder.
According to Namfisa this legal framework was very precarious, and had fundamental shortcomings, which undermined the sustainability of the industry, negated enforcement endeavours and exposed borrowers to exploitation.
Specifically the provision for the minister of finance to issue an exemption notice detailing the duties and obligations of micro-lenders, issued in terms of section 15A, was problematic as the authority to enforce its provisions could be challenged in the courts.
The new Act is also focused on promoting and protecting the rights of borrowers, says Namfisa. It does this by, among other means, seeking to limit malpractices that have been prevalent within the micro-lending industry in Namibia, according to the regulator.
“The Act thus prohibits practices that are detrimental to borrowers. These include the retention of the bank cards and PINs of borrowers, signing of blank or incomplete documents, inclusive of acknowledgments of debt, consents to judgment, waivers of borrowers’ legal rights and agreements to consent to the attachment of borrowers’ property without a court order,” elaborates Namfisa’s Victoria Muranda.
“The Act imposes specific obligations on micro-lenders to ensure that they practise responsible lending. At the same time, it also seeks to promote responsible borrowing. In addition, the Act seeks to foster financial inclusion, which is one of the key focus areas of the Namibia Financial Sector Strategy,” she says.
Muranda stresses that consumers must always take the necessary steps to ensure that they take informed decisions. In the context of micro-lending transactions, and especially with this new law being in force, this involves awareness of their rights, she says.
“It is important for borrowers to understand that the Act not only seeks to promote responsible lending, but also responsible borrowing. This means that borrowers have a responsibility to borrow responsibly.
“Hence, the Act has placed specific obligations on borrowers. These include, among others, providing complete and accurate information to allow a micro-lender to have a complete view of the borrower’s financial position.
“Ideally, this should allow micro-lenders to make an objective assessment of the consumer’s ability to service a new loan, having regard to all of his or her current expenditure and financial obligations,” she says.
Micro-lenders and cash-loan providers must register with Namfisa (Namibia Financial Institutions Supervisory Authority) annually now that Micro-lending Act has come into force since 15 October 2018.
The authority says micro-lenders who do not fully comply with the new act face deregistration and possible penalties up to N$100 000.
The main purpose of the new law is to regulate and supervise micro-lending business in Namibia, to establish an effective and consistent enforcement framework relating to micro-lending and to promote responsible borrowing and lending.
It is now the principal legislation governing micro-lending transactions and the affairs of micro-lending businesses in the country.
Previously micro-lending in Namibia was regulated in terms of the provisions of the Usury Act of 1968 and the Exemption Notice issued thereunder.
According to Namfisa this legal framework was very precarious, and had fundamental shortcomings, which undermined the sustainability of the industry, negated enforcement endeavours and exposed borrowers to exploitation.
Specifically the provision for the minister of finance to issue an exemption notice detailing the duties and obligations of micro-lenders, issued in terms of section 15A, was problematic as the authority to enforce its provisions could be challenged in the courts.
The new Act is also focused on promoting and protecting the rights of borrowers, says Namfisa. It does this by, among other means, seeking to limit malpractices that have been prevalent within the micro-lending industry in Namibia, according to the regulator.
“The Act thus prohibits practices that are detrimental to borrowers. These include the retention of the bank cards and PINs of borrowers, signing of blank or incomplete documents, inclusive of acknowledgments of debt, consents to judgment, waivers of borrowers’ legal rights and agreements to consent to the attachment of borrowers’ property without a court order,” elaborates Namfisa’s Victoria Muranda.
“The Act imposes specific obligations on micro-lenders to ensure that they practise responsible lending. At the same time, it also seeks to promote responsible borrowing. In addition, the Act seeks to foster financial inclusion, which is one of the key focus areas of the Namibia Financial Sector Strategy,” she says.
Muranda stresses that consumers must always take the necessary steps to ensure that they take informed decisions. In the context of micro-lending transactions, and especially with this new law being in force, this involves awareness of their rights, she says.
“It is important for borrowers to understand that the Act not only seeks to promote responsible lending, but also responsible borrowing. This means that borrowers have a responsibility to borrow responsibly.
“Hence, the Act has placed specific obligations on borrowers. These include, among others, providing complete and accurate information to allow a micro-lender to have a complete view of the borrower’s financial position.
“Ideally, this should allow micro-lenders to make an objective assessment of the consumer’s ability to service a new loan, having regard to all of his or her current expenditure and financial obligations,” she says.
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