Namibia Stock Exchange-listed Letshego Namibia says the introduced Micro Lending Act will impact on the profitability of its micro-lending business going forward as it moves to develop new product offering for its clients.
Microlending Act, 2018 (Act No. 7 of 2018, which came into effect in October of last year, regulates and supervises micro-lending business in Namibia, regulating their operations, ensuring that the playing field is level for all microlenders operating in the country.
The regulations also promote and borrowers, prohibiting malpractices which were now common in the industry such as the retention of the bank cards and PINs of borrowers, signing of blank or incomplete documents (inclusive of acknowledgments of debt, consents to judgment, waivers of borrowers’ legal rights and agreements to consent to the attachment of borrowers’ property without a court order).
“While the economic conditions are expected to remain challenging over the medium term, we will continue to focus on expanding our product offerings in line with our inclusive finance agenda and playing our part in supporting economic recovery and resilience. This will be developed and deployed in the context of the new Micro Lending Act, which is now effective and has implications going forward for yields in the Letshego micro-lending business,” the company said in its interim financials ended 30 June.
This comes as the company advanced N$2,7 billion to its customers during the period under review, a seven percent jump compared to the same period last year.
The listed financial services company said it will continue with its efforts to diversify its business in light of the current economic challenges, which is heavily reliant on its microlending arm, despite having secured a banking license in 2016.
“Against the backdrop of a challenging and increasingly competitive environment, the Group continues to work towards its diversification agenda and becoming a leading inclusive finance group.”
Letshego also revealed that it had now increased in banking branch network to three branches during the period under review, as it moves ahead with its deposit attraction strategy.
“Over the past six months, we have expanded our banking capabilities by establishing an access point in Mondesa, Swakopmund and we are now poised to offer full banking services in three branches countrywide. The rest of our existing footprint will be upgraded in the impending future as we accelerate our diversification strategy.”
Although the company was pleased with the performance with its banking arm, the unit saw its deposit decline from N$40,8 million last year to N$14,2 million during the six-month period.
“We are pleased with the progress made towards embedding our LetsGo transactional and savings offerings to complement our existing lending solutions. We continued to drive marketing strategies in support of our LetsGo omnichannel solution and this has given traction to our deposit mobilization agenda.”
In the period under review, Letshego recorded an N$235 million profit compared to N$230 million last year.
Already the Bank of Namibia has allayed fears on the impact that on-going job losses will have on bank’s non-performing loans as their clients struggle to service their loans, the with Governor Iipumbu Shiimi expressing his confidence in their capacity to absorb possible loses that may emerge when credit cannot be repaid.
The apex bank, however, said it was worried by the continued rise in the number of personal loans by Namibians to supplement their incomes and lifestyles, with the current levels according to its estimates standing at 84-85 percent of income.
In April 2018, the apex bank had issued the same caution about excessive household debt.