…payday borrowers owe N$58 million
The micro lending industry’s value of the loan book (outstanding value) increased by 1.0 percent on a quarterly basis and by 8.1 percent on an annual basis to N$7.4 billion, an industry quarterly report released by Namfisa reveals.
The loan book continued to be dominated by term lenders’ loans, which rose by 0.9 percent quarter-on-quarter and by 8.5 percent year-on-year to N$7.1 billion. Term lender loans accounted for 97.0 percent of the total share.
“This trajectory on a quarterly basis in the value of the stock of the loan book was mainly reflected in rising arrears, which continue at a significant pace, compared with the total value of disbursements that declined over the same period,” Namfisa highlights in the report.
Essentially, the total value of disbursements decreased quarter-on-quarter and rose year-on-year during the first quarter of 2022. Total disbursements declined by 10.2 percent on a quarterly basis and increased by 11.2 percent on a yearly basis to N$1.1 billion.
“This was mainly reflected in the share of the term lenders, whose disbursements continued to dominate that of the payday lenders. Over this period, the disbursements for the term lenders declined by 14 percent quarter-on-quarter and rose by 8.0 percent year-on-year to N$785.9 million during the first quarter of 2022,” Namfisa notes.
On the other hand, total arrears continued to increase significantly on a quarterly basis by 11.7 percent to N$1.5 billion during the review period.
“The rise in arrears is mainly an indication of distressed household finances, reducing the ability to service micro lending debt. Arrears in the total loan book are mainly reflected in the term lenders book at 96 percent, compared with payday lenders. As a percentage of the total value of the loan book, arrears rose from 19 percent at the end of the previous quarter of 2021 to 20 percent at the end of the first quarter of 2022, which indicates the rise in arrears. The amount due for the current period declined marginally to 80 percent during the review from 81 percent on a quarterly basis.”
Total arrears for the term borrowers stood at N$ 1.5 billion at the end of the first quarter of 2022, accounting for a default rate of 20 percent in the value of the loan book for the term lenders. The age category for 120 days + accounted for the largest default rate in the total value of arrears for the term lenders, accounting for 10 percent. The second largest default rate in the share at 9 percent is the age category for 30 to 60 days.
“In respect of the arrears for payday borrowers, the amount stood at N$58.8 million with a default rate of 24 percent, and 76 percent accounted for the payments due in the first quarter of 2022. The age category of 120 days + recorded the highest rate, accounting for a default rate of 15 percent at the end of the first quarter of 2022,” the regulator said.
The total number of borrowers effectively rose by 2.4 percent quarter-on-quarter and by 4.1 percent year-on-year to 239,308 during the review period. This is mainly reflected by an increase in the cumulative number of household borrowers for both term and payday lender categories.
“The subtle increase in the number of borrowers is mainly due to a gradual post-COVID-19 improvement in economic activities in the real sector. Term lenders continued to account for more than the percentage share for the payday lenders in the cumulative number of household borrowers.
“Driven by the behaviour of households, especially in respect of education expenses during the first quarter of the year, the number of new loans issued rose at the end of the first quarter of 2022, both on a quarterly and yearly basis. The number of disbursements rose marginally by 0.3 percent on a quarterly basis and significantly by 16.1 percent on an annual basis to 155,966 loans. This pattern was augmented by the coinciding effects of restrictive COVID-19 measures on the economy. The increase in the number of new loans was in line with the number issued by payday lenders, accounting for 84 percent of the total number of new loans issued, and, in contrast, those issued by term lenders declined,” explains Namfisa.
During the first quarter of 2022, the average values of the disbursements declined on a quarterly basis and increased on a yearly basis. For term lenders, the values of the disbursements averaged at N$31,834 and for payday lenders at N$2,301.