A New Era investigation has shown that ahead of and during the festive season Namibians find it hard to save money for the leaner times.
This trend appears to have become the norm, as at the beginning of each year many people find themselves in the same predicament.
The situation is aggravated by the fact many people fail to pay their bills in December. This is the time of year when fees for private schools are also due.
The queues leading to the overdraft section of some banks proved to be longer than usual this week, while micro-lending institutions (cash loans) also attracted a great number of desperate clients in recent days, New Era established.
There are around 277 micro-lending institutions in the country, according to the Namibia Financial Institution Authority (Namfisa) website. Most cash loan businesses charge interest fees of 30 to 45 percent.
The chief executive officer of Letshego Financial Services, Ester Kali, says people should start saving early for the year ahead, as part of their New Year’s resolutions to avoid falling into the same debt trap.
“The problem is that most people, including parents, fail to save earlier and are put in a trap of not having money at the beginning of the year when they are running around to source funds for the education of their children,” Kali said.
Taking out a loan to finance the education of children is a “productive loan”, she explained, as it could benefit the children in the long run and may help break the generational cycle of poverty.
However, taking out a “consumption loan”, which is for unnecessary expenses, such as gadgets and fancy clothes, results in unnecessary debts, she explained.
“We all know that after the long December most people have spent most of their money, so as you can see already it’s full here. The people don’t have money,” an employee of Cash Converters told New Era on Saturday morning. The worker asked to be quoted anonymously citing the nature of his job and the need to protect his clients.
“Children are going back to school, so parents are running around for money for school. Some people are running around for rent money. Every year it’s the same thing. People don’t save up for January and February,” they said.
At the time New Era visited Cash Converters at around 10h00 on Saturday people from all walks of life were trading their goods, including an iPhone, sewing machine, gardening equipment, kitchenware and more for cash in hand.
“People bring anything so what they have can be converted to cash. It’s just for them to solve their (financial) problem,” said the employee, explaining that clients can have their items held at the shop for a specific period while they find the means to pay back the amount taken, plus interest.
“The people [who come to sell their things] are the young and old. It’s everyone,” the worker noted when asked who most often uses their services.
“When you look at the economic situation of most Namibians, everything is going up, but there are also many unemployed people in the country. At the end of the day you just work for a house and food,” they said.
The employee was, however, quick to point out that although in January many people find themselves struggling financially many more struggle throughout the year, as they try to escape the difficult circumstances in which they find themselves.
“It’s always best to keep something aside, because when it comes to December it’s all festive season and buying things. But January and February are the months when people find it had to cope financially. So, just put a ten percent or five percent aside for such times,” the Cash Converters employee advised.
An employee at Lighthouse Cash Loan in Windhoek central business district said they do not ask customers what they are going to use the money they are borrowing for, as long as the borrowers are able to pay back the loan with 30 percent interest.
Information provided to New Era shows that by Saturday (7 January) there were 13 new clients at Lighthouse Cash loan for the month to date. This includes the regular clients, said a source at the institution. “Maybe they will keep on coming. We might reach 30 new clients,” the employee said.
In December there were 15 clients who borrowed money from Lighthouse Cash Loan. In November they had 25 clients and in October eight.
Some private businessowners borrow money (up to N$10 000) there to pay their employees when they are struggling, the Lighthouse Cash Loan employee explained.
“If a client qualifies for N$10 000, he or she can borrow N$5 000 on a short-term basis and N$ 5000 on the long -term,” she said.
The terms differ, depending on how long the client has been using their services. The higher the client’s income the more money they can borrow.
“The less you earn the less you get. The more you earn the more we give,” the employee explained.
“Most of them – let me say 89 percent – pay back their loans. Last month and the previous month we did not experience problems of people struggling to pay. Only five percent of those who came to borrow had difficulties paying back the money,” said the employee.
Those who struggle to pay back their loans are mostly employees of private firms, the woman said.
“Some people have problems to repay [the loan]. The majority are those who work for private companies, but there are also government employees who struggle to pay us back,” she added.
Failure to pay the loan back within three months or the agreed period results in an accumulation of interest charges and legal action can be taken against the client, a client, who did not want to be named said.
New Era also learned that some cash loans companies charge interest of up to 45 percent on loans and interest accrued.