Letshego Holdings Namibia, one of the country’s leading financial services groups, is facing a significant operational and strategic challenge following a government decision to suspend the Deduction at Source (DAS) code for public sector employees, effective 30 November 2025. The move threatens the core of Letshego’s lending model and has sparked concern among investors and analysts about the company’s future profitability and risk exposure.
The announcement, made on 28 August, directly impacts a substantial portion of Letshego’s loan book. As of the 2024 financial year, the company originated 110,607 loans through the DAS system, representing 96% of its total loan book value of N$5.2 billion. Although not all DAS loans are to government employees, the state remains Namibia’s largest employer, meaning a significant share of this portfolio is now under threat.
The DAS mechanism has been a cornerstone of Letshego’s business model, allowing the company to automatically deduct loan repayments directly from borrowers’ salaries before they are paid. This system drastically reduced default risk and provided a structural advantage in serving the often higher-risk microfinance segment. Its suspension removes a key risk-mitigation tool and forces Letshego to rethink its entire collections approach.
The company has not yet publicly detailed its response strategy. Analysts at local investment firm SSS, which recently reaffirmed a “HOLD” rating on Letshego stock, outline two likely scenarios. First, the bank may transition affected clients to a debit order system. While feasible, this would significantly increase administrative costs and, more critically, expose Letshego to higher default risk, as the discipline of direct salary deduction is lost. This could lead to an increase in non-performing loans (NPLs) and force the market to reprice the risk associated with Letshego’s business.
The second option would be for Letshego to absorb the cost and administration of continuing the deduction system itself to preserve the model. This would help maintain asset quality but would introduce new operational expenses, squeezing profitability. The central question remains whether the government’s withdrawal is due to opposition to the principle of DAS or simply an unwillingness to bear its administrative burden.
This development comes at a time when Letshego is otherwise performing strongly. The group recently reported impressive interim results for the six months ended 30 June 2025. Interest income grew by 20.9% year-on-year to N$586 million, driving a 24.8% increase in net profit to N$249 million. This robust performance was supported by resilient net interest margins, strong double-digit growth in insurance income, and a significant reduction in impairment charges.
Yet, beneath the strong headlines, some pressures were already building. The interim report noted a 16.5% year-on-year increase in collection fees, signalling rising arrears and potential credit stress. Employee benefits also rose sharply by 32.3%, highlighting ongoing cost pressures.
The suspension of the DAS code now amplifies these underlying concerns. For years, analysts have questioned the sustainability of Letshego’s heavy reliance on a single, policy-dependent lending model. This event validates those risks and presents the most direct challenge to the company since it secured its full commercial banking licence in 2014.
From a valuation perspective, SSS maintains a target price of 644.6 cents for Letshego shares, suggesting a slight 2.9% downside from the current price of 664.0 cents. This assessment is based purely on fundamental performance and deliberately excludes the impact of the DAS suspension due to a lack of clarity. The firm has indicated it will reassess its position as more information becomes available.
Despite the uncertainty, Letshego remains the top-performing stock on the Namibian Stock Exchange (NSX) year-to-date, up 32.8%. It also offers the highest dividend yield on the exchange, at over 14%, supported by a high payout ratio of 94%. This reflects management’s strong commitment to returning value to shareholders, though it also raises questions about the medium-term growth of retained earnings and intrinsic value.
The coming months will be critical for Letshego. How it navigates the transition away from a guaranteed repayment system will test its operational agility and risk management framework. The company’s ability to innovate—perhaps by leveraging its recent partnership with mobile telecom operator MTC to tap into fintech solutions—will be closely watched.
For now, the market is in a wait-and-see mode. The resilience that defined Letshego’s past growth is facing its toughest trial yet.