Payday loans surge after payroll curbs
The number of Namibians borrowing from microlenders rose by 16.3% to 279,594 in 2025, driven by a surge in payday loans, even as the total amount owed to the industry fell by 6.4% to N$7.6 billion.
The Namibia Financial Institutions Supervisory Authority (NAMFISA) said in its annual report that lenders disbursed N$5.3 billion in loans during the year, up 1.6%.
NAMFISA said the number of payday borrowers jumped by 75.9%, while term borrowers fell by 7.6%. It said the shift was largely down to the discontinuation of the Payroll Deduction Management System (PDMS), which has let approved lenders and insurers deduct repayments, premiums and other voluntary obligations directly from civil servants’ salaries since 2003.
The finance ministry said on 28 August 2025 that discretionary payroll deductions would end from 30 November, with only existing loans continuing. Statutory deductions such as tax and pension contributions would remain.
The ministry said payroll deductions used by microlenders did not comply with the Labour Act and had let lenders bypass proper affordability checks. It said the phase-out was aimed at forcing stricter lending practices and reducing over-indebtedness.
Payday lenders issued 11.7% more new loans, while term lenders issued 29.6% fewer, taking the total to 730,868, up 4.4%. The average payday loan was about N$3 906, against about N$23 495 for a term loan, which was 15.7% lower than a year earlier.
Simonis Storm economist Almandro Jansen said the figures could point to growing pressure on household cash flow, with some consumers potentially using credit to bridge the gap between income and monthly expenses.
“My reading is that the data points to strained liquidity in a growing share of households, more than outright insolvency. People are borrowing to manage the gap between income and expenses, not to expand their wealth,” Jansen said.
He said the rising cost of food, transport, rent, utilities and school expenses, combined with wages that have not kept pace, could be leaving households financially stretched before the end of each month.
“A household can be no worse off this month than last and still be structurally short at month-end,” he said.
The report said the economy grew by 1.7% in 2025, down from 3.8% in 2024, while inflation eased to 3.5% from 4.3%.
Jansen said limited access to traditional bank loans could also be pushing lower- and middle-income earners towards microlenders, particularly those offering payroll-linked loans to formally employed workers. He said the fall in outstanding debt should not be read as evidence that household finances were improving.
While the number of borrowers rose, the outstanding loan book shrank, suggesting the average balance per borrower may have fallen. Jansen said this could reflect smaller loans, shorter repayment periods, tighter lending assessments or debt written off by lenders, rather than improved financial security.
“Smaller loans spread across many more people can just as easily describe wider financial stress,” he said.
Old Mutual financial adviser Zono Kambepira said microlending becomes particularly concerning when people repeatedly borrow to cover basic living expenses instead of using credit for one-off emergencies.
He said medical bills, funerals and unexpected vehicle repairs were among the situations that could push people towards short-term loans when they had insufficient savings. But he said regularly borrowing to pay for groceries, rent or transport could indicate that household income was no longer enough to cover monthly needs.
Repeated borrowing can also create a cycle in which an increasing share of a person’s salary goes towards repayments, leaving less money for food, housing and other essentials, he said.
“Using new loans to repay existing debt is often a sign of financial strain and can lead to long-term affordability issues,” Kambepira said.
He said borrowers should consider the full repayment amount, including interest and fees, rather than focusing only on how much money they receive. Repayments should remain affordable after essentials such as housing, food, transport and utilities have been covered, he said.
Kambepira said young adults, working parents and pensioners could face different pressures that influence their borrowing decisions. Young workers may have limited savings and struggle to qualify for bank finance, while parents may face the combined costs of food, school expenses, housing and supporting dependants. Pensioners, meanwhile, may be particularly vulnerable because their incomes are fixed while living costs continue to rise.
He said more detailed information on borrowers’ ages, loan purposes, repayment difficulties and the number of loans held by each person would help establish which households are under the greatest pressure. He also called for better information on whether loans are being used for emergencies, small businesses or recurring household expenses. The report does not break down borrowers by age, loan purpose or repayment difficulty.
Kambepira said budgeting, emergency savings and responsible borrowing remained important safeguards against unsustainable debt.
Microlenders make up 958 of the 1 193 institutions NAMFISA regulates but hold about 1.4% of the non-banking financial sector’s N$552.8 billion in assets.
-desmarius@nma.com.na
