FLI Secretariat Manager, Francois Brand, says that a lack of financial planning remains a challenge among most households, which results in them resorting to loans to supplement their income.
“Namibians are simply ignorant. They borrow even money that they know they are unable to repay. They know where to go for financial education, but they don’t go to those various institutions,” he said.
“At this time of the year, most people run to loan sharks to survive January, adding on to the debt they already incurred last year that has not yet been fully settled. People lack planning and if one does not have a plan, it will be very difficult to stay on track with their finances. Before people go ahead and buy things on credit, they need to plan well before they run to banks or other financial institutions for loans,” Brand said.
Quizzed on whether banks were being reckless in the manner in which they lend to clients, Brand absolved the lenders, putting the blame squarely on individuals.
“Some people lie on their application forms to get a loan, and hence they are given the loan, but when they are eventually stuck in this whole situation, that is when they run to Namfisa (the Namibia Financial Institutions Supervisory Authority) and unfortunately in such a case, they cannot be assisted,” he said.
According to a Bank of Namibia (BoN) report, growth in credit extended to the private sector slowed, year-on-year and quarter-on-quarter, at the end of the second quarter of 2016.
Growth in the private sector credit extension (PSCE) slowed to 1,5 percent at the end of the second quarter of 2016, compared to 2,8 percent at the end of the corresponding quarter of 2015, as well as 2,2 percent at the end of the preceding quarter in 2016.
The slowed growth in PSCE is reflected by a decline in the borrowing activities of both the household and corporate sectors during the reviewed period.
The growth in credit extended to the household sector slowed as a result of the lower growth in all major credit categories at the end of the second quarter of 2016.
Total credit extended to households stood at N$47,4 billion, representing a quarterly growth rate of 1,9 percent. This growth was lower than the 2,5 percent recorded at the end of the second quarter of 2015.
The slowed growth in credit to individuals primarily came as result of a decline in instalment and mortgage credit, which started trending downwards since the first quarter of 2016.
However, when compared to the growth of 1,5 percent at the end of the previous quarter, growth in individual credit rose.
Likewise, the demand for credit by businesses slowed to 0,9 percent at the end of the second quarter of 2016, compared to 3,2 percent at the end of the corresponding quarter in 2015. This growth was underpinned by slowed growth rates in most credit categories during the period
Commenting on the declining PSCE, Brand expressed concern with the decline in mortgage loans, although he said he is happy with the decline in personal and vehicle loans, as it is a good thing.
He added that despite the organisation running various programs and projects, to educate the public, including for small and medium enterprises (SMEs), behavioural change remains a challenge.
The institution offers business training sessions for SMEs and the general public, but people hardly attend these, Brand said.
“The challenge the institution is still faced with is the issue of behaviour and attitude, which will take some time for people to change,” he said.
“Namibian SMEs are a bit spoiled and a number of them are no longer interested in this training. Some of them apply for these training sessions, but they never pitch.”
The FLI is a national platform to enhance financial education for individuals and micro, small and medium-sized enterprises.
Currently, the FLI consists of more than 25 platform supporters from the Namibian public, private and civil society sectors, whose main aim is to work in a coordinated effort to improve the financial capability of all Namibians.
The FLI was initiated by the Ministry of Finance and several platform supporters on 15 March 2012.
Tips for surviving January
1. Use your savings
2. Try to borrow without interest
3. Plan properly and stick to your budget
4. Cut all other unnecessary expenses
5. Sell everything you don’t need
6. Differentiate between needs and wants
7. Spend money for productive reasons
8. Do not opt for brands, rather look for quality; attend auctions as things there are much cheaper, compared to those you buy on credit
9. Be creative with your money
10. Avoid debt for consumption
11. Pay your contractual agreements on time
12. Live within your means