Understanding Micro-Lending: Your Rights and Cost Breakdown
Definition of Money Lender and Micro-lender
In terms of the Usury Act, 1968 (Act No. 73 of 1968), a money lender is defined as any person who is granting or has granted a loan or a sum of money to a prospective borrower in terms of a money lending transaction. The Minister issued Exemption Notice No. 189 of 25 August 2004 under section 15A of the Usury Act, 1968 defining a micro-lender as a person registered with the Registrar and whose business includes the carrying on of micro loan transactions.A micro loan transaction is defined as a money lending transaction in respect of which the loan amount:
a. Does not exceed N$50 000;
b. Together with the finance charges which is owing by the borrower must be paid to the micro-lender, whether in instalments or otherwise, within a period of 60 months after the date on which the sum of money has been advanced to the borrower; and
c. Is not paid in terms of a credit card scheme or withdrawn from a cheque account with a bank so as to leave that cheque account with a debit balance.
Money lenders, except micro-lenders, are not obliged to register with NAM-FISA. In terms of Exemption Notice No. 196 of 25 August 2004, money lenders are only allowed to charge maximum annual finance charges at an average prime rate times 1.6. It is currently 9.75* percent times 1.6 equaling 15.60 percent per annum. In addition, money lenders have the obligation to pay a levy to NAMFISA amounting to 1% of the loans disbursement.
(*9.75 percent as at 31 May 2012)
Example Calculations
30 Day Loan (N$1,000)
Annual finance charge = (Loan amount x (average prime rate x 1.6)) ÷ 12= (N$1,000 x (9.75% x 1.6)) ÷ 12
= (N$1,000 x 15.6%) ÷ 12
= N$156 ÷ 12
= N$13
Total amount payable = Loan amount + annual finance charge
= N$1,000 + N$13 = N$1,013
6 Months Loan (N$1,000)
Annual finance charge = Loan amount x (average prime rate x 1.6) x (6 ÷ 12)= N$1,000 x (9.75% x 1.6 x 0.5)
= N$1,000 x 15.6% x 0.5
= N$156 x 0.5
= N$78
Total amount payable = Loan amount + annual finance charge
= N$1,000 + N$78 = N$1,078
12 Months Loan (N$1,000)
Annual finance charge = Loan amount x (average prime rate x 1.6)= N$1,000 x (9.75% x 1.6)
= N$1,000 x 15.6%
= N$156
Total amount payable = Loan amount + annual finance charge
= N$1,000 + N$156 = N$1,156
Money lenders are also not allowed to keep the Bank Cards and PIN of borrowers
Where borrowers find that money lenders charge in excess of the maximum allowable finance charge rate, they should report this anomaly immediately to NAMFISA.
Money lenders are also not allowed to keep the Bank Cards and PIN of borrowers
Summary
Understanding Money Lending and Micro-Lending in Namibia
In terms of the Usury Act, 1968 (Act No. 73 of 1968), a money lender is defined as any person who grants a loan to a borrower in a money lending transaction. To regulate this industry and protect consumers, the Minister of Finance issued Exemption Notice No. 189 of 25 August 2004, under section 15A of the Usury Act. This notice formally recognizes a micro-lender as a person registered with the Registrar (NAMFISA) and whose business involves micro loan transactions.
A micro loan transaction is a lending agreement that meets the following criteria:
A micro loan transaction is a lending agreement that meets the following criteria:
Registration and Regulation
Finance Charges and Interest Limits
According to Exemption Notice No. 196 of 25 August 2004, the maximum annual finance charge that a money lender may impose is:
Average prime rate x 1.6
As at 31 May 2012, the prime rate was 9.75%, resulting in a maximum finance charge of 15.60% per annum.
Lenders are also required to pay a levy of 1% of their total loans disbursed to NAMFISA.
Loan Examples
1. 30-Day Loan (N$1,000)
Annual Finance Charge = (N$1,000 × 15.6%) ÷ 12 = N$13 Total Repayment = N$1,000 + N$13 = N$1,013
Annual Finance Charge = (N$1,000 × 15.6%) ÷ 12 = N$13 Total Repayment = N$1,000 + N$13 = N$1,013
2. 6-Month Loan (N$1,000)
Annual Finance Charge = N$1,000 × 15.6% × (6 ÷ 12) = N$78 Total Repayment = N$1,000 + N$78 = N$1,078
Annual Finance Charge = N$1,000 × 15.6% × (6 ÷ 12) = N$78 Total Repayment = N$1,000 + N$78 = N$1,078
3. 12-Month Loan (N$1,000)
Annual Finance Charge = N$1,000 × 15.6% = N$156 Total Repayment = N$1,000 + N$156 = N$1,156
Annual Finance Charge = N$1,000 × 15.6% = N$156 Total Repayment = N$1,000 + N$156 = N$1,156
Important Consumer Protections
Consumer Reminder
Before accepting a loan:
For more information or to report an issue, contact NAMFISA directly