Namibia amends credit act to discourage household borrowing

Namibia has amended the Credit Agreement Act to discourage people from borrowing money to spend on luxury goods.

The amended legislation, championed by the industrialization ministry and the Bank of Namibia, has already been passed by the National Assembly and awaits President Hage Geingob's signature.

It is not known yet when Geingob will sign the amended Act.

Governor of the Bank of Namibia Ipumbu Shiimi, who announced this Wednesday during a press briefing in Windhoek, said the amendments demand that borrowers should make a deposit of 10 percent before buying cars, for example.

In May 2015, the Bank of Namibia said it was hiking its repo rate by 0.50 basis point to contain household borrowing to finance luxurious lifestyles.

In a statement then, the central bank said a "large portion of these loans continue to be primarily used to finance unproductive imported luxury goods, hence putting additional pressure on the international reserves."

"With this increase in the Repo rate, the expectation is that the deposit-taking institutions will also increase deposit rates by the same margin, thereby encouraging saving," the central bank said.

In fact, the Bank of Namibia has since increased the repo rate to 7 percent from the 6.50 percent in 2015 but despite this the central bank in May 2016 said household debt had risen to 89.1 percent of disposable income as at end of 2015 from 85.5 percent a year earlier. Enditem