# MICRO-LENDING OPERATION

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 Reg-istrar 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 instilments 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c. Is not paid in terms of a credit card scheme or withdrawn from a cheque account with a bank so as to leave that cheque account with a debit balance.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 lend-ers 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:

If a borrower borrows N\$1,000 in respect of a 30 day loan, the annual finance charge will be calculated as follows:

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 in respect of a 30 day loan = Loan amount + annual finance charge

=N\$1,000 + N\$13 =N\$1,013

If a borrower borrows N\$1,000 in respect of a 6 months loan, the annual finance charge will be calculated as follows:

Annual finance charge = Loan amount x (average prime rate x1.6) x ( 6 ÷ 12)

= N\$1,000 x (9.75% x 1.6 x (6 ÷ 12))

= N\$1,000 x 15.6% x (6 ÷ 12)

= N\$156 x 6 ÷ 12

= N\$78

Total amount payable in respect of a 6 months loan = Loan amount + annual finance charge

=N\$1,000 + N\$78 =N\$1,078

If a borrower borrows N\$1,000 in respect of a 12 months loan, the annual finance charge will be calculated as follows:

Annual finance charge = Loan amount x (average prime rate x1.6)

= N\$1,000 x (9.75% x 1.6)

= N\$1,000 x 15.6%

= N\$156

Total amount payable in respect of a 12 months loan = 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