Low incomes and rising living costs are pushing Namibian households deeper into debt, with some increasingly relying on borrowing to meet basic expenses, the Bankers Association of Namibia (BAN) has warned.
BAN Chief Executive Officer Dantagos Jimmy said Namibia is facing an “income crisis”, with median monthly income estimated at around N$4,000, leaving many households with insufficient income to cover their living costs.
She said the resulting financial pressure is contributing to short-term borrowing, refinancing and loan stacking, where consumers take out multiple loans to meet their financial obligations.
“Namibia’s aggregate household debt position is currently contained, but there are pockets of significant household financial distress. The problem is driven by the interaction of income pressure, the cost of living, short-term borrowing, refinancing, loan stacking and insufficient financial buffers,” Jimmy said.
“This goes back to the fact that what we really have is an income crisis. Our income is not keeping up with what our salaries are expected to maintain.”
Jimmy was presenting to the Parliamentary Standing Committee on Economy and Industry, Public Administration and Planning as part of stakeholder engagements on household debt and lending practices.
BAN said private-sector credit extension has been trending downwards, arguing that the current household debt pressures are not being driven by banks aggressively expanding credit.
Jimmy said civil servants are particularly exposed to borrowing because their stable employment, predictable salaries and payroll-linked repayment mechanisms make them attractive to lenders.
She warned that these advantages could contribute to over-indebtedness when borrowers accumulate multiple loans.
“They have stable incomes and generally offer lenders predictable salaries, relatively stable employment, established payroll systems, lower collection risk and certainty, as well as the ability to use payroll-linked repayment mechanisms,” Jimmy said.
“This should have been something positive if it was being used in the way it was supposed to be used.”
BAN, however, defended the payroll deduction code system, arguing that it facilitates lending but is not the underlying cause of over-indebtedness.
The association called for reforms that would provide greater visibility of borrowers’ total deductions, protect residual income and strengthen affordability assessments.
It also proposed integrating deduction information with credit bureau data and improving transparency for borrowers to reduce the risk of consumers accumulating unsustainable levels of debt.
On borrowing costs, Jimmy said lending rates are influenced by the Bank of Namibia’s repo rate of 6.75%, the prime lending rate of 10.25% and the individual risk profile of borrowers.
Civil servants may qualify for lower rates because stable employment, predictable income and payroll deductions generally make them lower-risk borrowers.
“As we have said, we price off the monetary policy set by the Bank of Namibia. But the answer should be based on economic factors and not political considerations,” Jimmy said.
“A civil servant may represent a relatively lower credit risk because of stable employment, predictable income and payroll deductions. However, the lending rate also reflects funding costs, credit risk, capital requirements and liquidity costs.”
BAN rejected calls for arbitrary interest rate caps, arguing that borrowers have different risk profiles and that lending costs should reflect economic and risk factors.
The association instead supports an industry-wide consumer pricing transparency framework aimed at making the cost of borrowing clearer to consumers.
Jimmy also acknowledged weaknesses in Namibia’s consumer credit regulatory framework, with credit activities falling under different regulators, including the Bank of Namibia and the Namibia Financial Institutions Supervisory Authority (Namfisa).
BAN said the fragmented regulatory environment could create information gaps and opportunities for regulatory arbitrage.
