CURRENT credit laws have loopholes making them insufficient to protect consumers, and allowing for their exploitation.
This is according to the Namibia Financial Institutions Supervisory Authority (Namfisa), which has in a statement called on members of the public to provide input for the drafting of legislation on consumer credit.
Consumer credit includes all credit extended for investment, business or consumption purposes.
This includes secured and unsecured term loans, revolving credit facilities and finance leases.
Credit extension in Namibia is regulated under the Credit Agreements Act, the Usury Act, the Banking Institutions Act and the Microlending Act.
“Credit extended by retailers, for example, is not supervised against unfair market conduct, although it is also a financial service instrument, resulting in fragmented regulation and supervision of consumer credit, with limited impact on the indebtedness of households,” the authority’s statement reads.
Namfisa says the envisaged consumer credit legislation is intended to ensure fair treatment of consumers, comprehensive affordability assessment and risk control in the value chain.
The authority says increasing household debt and the number of loan defaults also motivates a call for responsible lending.
The problem is amplified further by household debt as a percentage of disposable income that has averaged 96% from 2014 to 2018.
Namfisa says this is due to “poor business market conduct such as inadequate due diligence on affordability assessments”.
Non-performing loans for the banking institutions are currently at 4,8% of the loan book, compared to that of the non-banking sector, which is above 2%.
The regulator says disclosure and transparency requirements will discourage credit providers from disguising the true cost of credit, and should provide clear and concise disclosures in simple language.
According to Namfisa, responsible pricing provides a set of guidelines on how prices should be set up, adding that “in Namibia, this is not complied with to a great extent as there are no provisions requiring pricing procedures to be in place”.
Currently, the assessment of creditworthiness in the banking sector has to comply with the loan-to-value ratio applied to mortgages, asset-liability assessment requirements, and the ability to repay, the authority says.
On the non-banking side, assessments have been poorly complied with by service providers due to collecting debt at payroll level among other things.
Another aspect of responsible lending pertains to debt collection in terms of ensuring that consumers who fall behind in payments do not suffer from improper or deceptive collection processes.
Namfisa says unfair debt collection should be addressed in Namibia.
The envisaged policy will also touch on credit extended via Agribank, the Development Bank of Namibia, building societies, the National Housing Enterprise, cooperative societies and telecommunication companies.
Namfisa will undertake prudential and market conduct supervision for non-banking financial institutions, and the Bank of Namibia for banking financial institutions.
“With a population with little understanding of their consumer rights and knowledge about financial products and services, and the implications thereof, the situation remains precarious and more imperative now than before considering the high level of household debt,” states Namfisa.
The consumer credit policy will focus on responsible lending and borrowing to ensure that not only a sustainable consumption pattern is promoted for current and future generations, but also that savings are built up for future needs.
Namfisa is in this project in collaboration with the Ministry of Finance, the Bank of Namibia, the Ministry of Industrialisation and Trade, the Financial Literacy Initiative and GIZ.
The public is encouraged to submit their inputs on or before 31 July 2020.
The policy document, as well as a comments template, are available at www.namfisa.com.na/publications.
In an age of information overload, Sunrise is The Namibian’s morning briefing, delivered at 6h00 from Monday to Friday. It offers a curated rundown of the most important stories from the past 24 hours – occasionally with a light, witty touch. It’s an essential way to stay informed. Subscribe and join our newsletter community.
The Namibian uses AI tools to assist with improved quality, accuracy and efficiency, while maintaining editorial oversight and journalistic integrity.
Stay informed with The Namibian – your source for credible journalism. Get in-depth reporting and opinions for
only N$85 a month. Invest in journalism, invest in democracy –
Subscribe Now!
