We all love the gore of nature shows. How crocodiles are able to go undetected in the water, waiting for hours or even days before lunging out, opening and shutting it’s jaws (with a bite force of 3,700 psi) before pulling its signature ‘Death Roll’ and drowning its prey.
Honestly, even just reading that one sentence is better than watching football, it is truly box office stuff right there. On a slightly more serious note, watching one of these shows on Animal Planet should give you some real perspective on life. The concrete jungle is no different. Having money is just as important as surviving out there in nature.
I would like to introduce you to the concept of loan sharks, step forward readers. Anyone that charges exorbitant fees to you for borrowing less than 3 figures is a loan shark in the making, or at least that’s in their nature.
Just to be clear there is a BIG difference between micro-lenders and loan sharks, I’m not slating all institutions that borrow money. Often operating in a very underground manner (illegal, unregulated, blackmailing and/or violent if necessary), a loan shark charges ridiculously high interest rates on the money they borrowed and will use any means if necessary to collect what they’re owed .
Microlenders are perfectly legal and are regulated by our own regulating authority of financial institutions and financial services, NAMFISA. Micro-lenders refer to loans under N$50,000 which must be repaid over a maximum period of 60 months to the micro-lender, usually in instalments.
How these sharks started thriving is from how they are designed. Their business structure is so convenient for anyone from the street to get cash that it allows for the easing of doing business. Not having sufficient income and collateral are few of the many reasons loan applications are turned down by banks.
This allows loan sharks to be the most appealing option as they are willing to take on those risks. What makes these arrangements turn very sour is how interest rates can be charged daily, weekly or monthly by loan sharks, causing the amount to be paid to balloon 10 fold in less than a year.
To combat these unfair predatory practices are Namibia’s very own Quint (just keeping on the Jaws theme ladies and gentlemen)-The Usury Act of 1968 and the Micro-lending Act to name a few. The Usury Act dictates the annual finance charge rates a micro-lender can impose when you take out a loan.
As gazetted, the annual finance charge rate in respect of a money lending, credit and leasing transaction may not be 1.6 times the prime rate (7.5% as at 13 June 2021), which equals 12% for a micro-lending transaction the two parties have agreed the charge rates are fixed or variable. So if you want to borrow N$1 000 and you agree to pay it back in 12 months, you will be charged as follows:
Annual finance charge = Loan amount x (prime rate x 1.6)
= N$ 1,000 x (7.5% x 1.6)
= N$ 1,000 x 12%
= N$ 120
So the total amount you would pay back in 12 months is the initial loan amount and the charge which is N$1,120. Depending on how long you agree to pay back the initial loan amount and additional charges, the total amount you have to pay will be different.
It’s crucial to know what you’re getting in when you agree to take money from someone and know what the risks are. What starts out as a bit of economic relief can turn into crippling debt. Remember people, don’t let yourself become shark bait! (maybe I should start watching crime shows).