Optimum interest rate regime for microlenders and moneylenders

Genesis was appointed by the Namibia Financial Institutions Supervisory Authority (NAMFISA) to review options for an optimum interest rate regime for microlenders and moneylenders. The premise to the study was that the interest rate caps set under the Usury Act 73 of 1968 and the Exemption Notice No. 189 of 2004 issued under the Act were no longer aligned to current practices in the industry. In addition, as contemplated in the Namibia Financial Sector Strategy 2011-2021, the threshold annual finance charges by the industry were not aligned to international best practice.

To determine an optimum interest rate regime Genesis investigated the local context in Namibia through an in-depth analysis of the microlending industry, the current regulatory and macroeconomic environment and the impact of microfinance on financial inclusion. Genesis then engaged with relevant regulatory bodies (including NAMFISA, the Bank of Namibia and the Ministry of Finance) as well as a host of microlenders and moneylenders of all sizes to obtain a perspective on required changes to prevailing legislation. The third part of the research included a review of international practice in the setting of interest rate regimes for microlenders across a range of comparable markets.

Having conducted this research, we developed a series of recommendations to guide NAMFISA's future approach to regulating interest rates charged by microlenders and moneylenders in Namibia.