In a stable political environment and enabling macro economy, microfinance
institutions are important in providing savings, credit, funds transfer and other
financial intermediation facilities to low-income households, micro-enterprises and
marginal small-scale enterprises. Effective, long-term provision of these facilities
occurs through microfinance institutions that adhere to the key principles of
microfinance endorsed by CGAP.
This report presents a synthesis of selected issues contributing to the microfinance
gap in Namibia and associated solutions, in the context of the key principles of
microfinance. It highlights the fact that the microfinance industry has shown
significant signs of activity over the past few years.
Rather than onerous regulation, this report suggests that both regulators and
practitioners should explore and promote ways that microfinance institutions can
reduce costs while controlling the integrity of the loan portfolio. One key area that
opportunities exist is through the sharing, for a fee, of existing distribution networks
currently owned by disparate microfinance players to reduce transaction costs of
loan disbursement, collection of repayments and savings mobilisation.
Other ways that cost can be reduced include the separation of financial from nonfinancial
service provision in the auditing of microfinance performance; the
incorporation of strategies to reduce risk exposure from social factors in the
microfinance institutional model, such as HIV/AIDS; the embracing of technological
innovations to further reduce transaction costs, including credit and risk
management tools; and the development and use of cost-friendly enabling
infrastructure to promote financial sustainability.
Apart from structure, ownership and control; another key criterion of good
governance is public timely and full reporting of an institution’s activities and results.
From this perspective, the quality of objective information in Namibia’s microfinance
sector needs to be improved before policy intervention can be considered.
Professional auditing firms can be a useful provider of financial capturing and
reporting services for a fee, under their corporate social responsibility mandates.
Based on reliable information, an accurate snapshot of the complete picture of
microfinance in Namibia can be presented periodically, which will also enable the
tracking of dynamics over time.