Cashloans blame weak savings and multiple creditors
The Micro Lenders Association (MLA) has rejected claims that it is responsible for trapping Namibians in debt, saying individuals’ weak savings practices are partly to blame.
The association, which represents cash loan companies, wrote a 15-page letter on 16 June to the parliamentary standing committee on economics.
“The available material shows that debt distress arises from wider socio-economic pressures as well as from multiple credit sources, weak savings, income constraints, payroll-system design, and regulatory gaps across the consumer-credit market,” its lawyer, Charles Visser, says.
According to the association, the high levels of debt are caused by economic pressures on individuals rather than predatory lending practices.
“The MLA respectfully but firmly rejects the proposition that registered microlenders should be singled out as the cause of the debt problem when the evidence before the committee points to broader structural causes and a wider credit ecosystem,” the association says.
This comes as the committee examines whether the country’s laws are really protecting civil servants against microlenders, following a motion that was tabled in the National Assembly last year by parliamentarian Inna Hengari.
Households in Namibia, overall, owe N$78 billion in debt. Nearly 10% of this is debt owed to microlenders, according to the Namibia Financial Institutions Supervisory Authority (Namfisa) data in December 2025.
Visser said the percentage of debt owed to microlenders is too low to be considered the driving factor behind civil servants taking on debt.
“Namibia faces structural socio-economic challenges, including high unemployment, very high inequality, and insufficient growth to generate enough jobs and reduce poverty – challenges that are not attributable to the conduct of any single market participant,” Visser said.
Namfisa does not collect data on the employment status of borrowers, however, the authority believes that civil servants make up a significant proportion of microlenders’ clients due to their steady incomes.
Central to the debate for civil servants has been a system that allows a few microlenders to deduct interest payments directly from the employee’s salary before it is paid out.
MLA said the system has issues and requires careful regulation.
“The system itself was created by the government to broaden civil servants’ access to financial services and was not inherently abusive,” Visser said.
He added that only 12% of loans disbursed by term lenders in 2025 used those deduction codes.
“These deduction-code holders are mostly banks, bank-related entities, or large financial institutions. Smaller microlenders have always been de facto excluded from participating in government salary deductions,” Visser said.
He also denied that regulated microlenders engage in predatory practices, saying that they follow Namfisa regulations.
SURVIVAL, NOT CHOICE
The Economic and Social Justice Trust says the growing debt burden among civil servants and ordinary Namibians is not driven by reckless spending but by the struggle to survive on inadequate incomes.
The organisation’s treasurer, Claudius Riruako, says many Namibians are trapped in a cycle of borrowing simply to meet basic needs.
“The uncomfortable truth is that debt has become a survival mechanism,” he says.
Riruako cites the Namibia Statistics Agency’s 2025 census report, which shows 55% of Namibians earn N$5 000 or less per month, while 34.5% earn below N$2 000.
“These households live far below the cost of basic necessities.
Many are forced to borrow money to repay existing loans, creating a cycle of debt that is difficult to escape,” Riruako says.
He says affordability assessments conducted by microlenders often involve people who are already living in severe financial distress. He calls for stronger action against illegal lenders and urges stricter enforcement of lending regulations.
As a long-term solution, he proposes the implementation of a universal basic income grant, adding that pilot projects have shown the potential to reduce household debt by as much as 36%.
He suggests funding the programme through wealth taxes on luxury assets and revenue from natural resources.
The Namibia Consumer Trust also calls for greater consumer representation within regulatory bodies.
Consumer trust executive director Michael Gawaseb says consumers lack a voice in decision-making structures.
REFORMS
Following the committee hearing on Friday, chairperson Iipumbu Shiimi said civil servants should be treated as low-risk customers and pay lower interest rates than the ones currently enforced by Namfisa.
He said lenders have direct access to civil servants salaries, making the risk of default almost zero. Shiimi said civil servants have a better capacity to pay back loans compared to prime customers at banks and should be charged interest rates that are below the prime lending rate.
Recent figures indicate that household debt rose sharply, with the total value of disbursed loans by microlenders rising significantly per annum.
“Payday lending accounted for 82% of the total new loans issued and term lenders accounted for the remainder.
This trend suggests that many households are borrowing not to invest or build assets, but for day-to-day survival,” Shiimi said.
In certain cases, he said salary deductions are reported to exceed sustainable income thresholds, which is against section 12(b) of the Labour Act 11 of 2007.
He added that the MLA submissions acknowledged that the deduction code may have created some unintended consequences, making a review of the system necessary.
Shiimi said he will support proposals allowing consumers to lodge complaints directly with financial regulators instead of pursuing costly court battles.
REALITIES OF LOANS
A senior cleaner at Katutura State Hospital, Lydia Uzombala, says borrowing money is often not a choice but a necessity.
“We are forced by our situation.
There comes a point when you can no longer borrow from lenders because you’re blacklisted and you start borrowing from colleagues. At the end of the day, your entire payslip goes towards paying debt,” she says.
Although she earns around N$4 000 per month, Uzombala says the salary remains insufficient to cover basic living expenses, including housing, transport and food, as the cost of living continues to rise.
EXPLAINING RATES
Currently, microlenders are allowed to charge an interest rate that is twice the prime rate for term loans.
A prime rate is a benchmark interest rate that banks charge to their most creditworthy customers.
In February, the prime rate was 10%, which means microlenders were allowed to charge 20% interest on loans that have to be repaid within 60 months. The interest rate cap increases to 30% of the value of the loan if it will be repaid within five months.
A separate category of moneylender, which does not qualify as a microlender but is also regulated by Namfisa, can only charge 1.6 times the prime rate.
