Namibian workers should access their pension savings – World Bank
Mortgage financing market faces constraints
Namibia's five commercial banks financed approximately 73 396 mortgages in 2020, but the World Bank noted that these were primarily granted to upper-income households.
A World Bank study has advised government to consider allowing Namibians to access their future retirement savings to fund their mortgages.
The bank noted that while Namibia’s banking fundamentals are generally solid, the capacity to extend housing lending is constrained by high existing ratios of housing lending to other types of debt and by dwindling household affordability.
The recommendations are contained in a country diagnostic titled ‘Creating Markets in Namibia’, and come amid plans by the Namibia Financial Institutions Supervisory Authority (Namfisa) to implement regulations as per the Financial Institutions Market Act that would only allow retirement fund members access to 25% of their pensions at retirement or resignation before the age of 55.
David Nuyoma, the CEO of the Government Institutions Pension Fund (GIPF) - the biggest pension fund in Namibia - welcomed access being granted to fund members to use their future retirement savings to finance their mortgages.
“The GIPF already introduced a mortgage housing financing facility in 2015 for members. As we recognise the housing unit shortage and the limited land servicing capacity by local authorities in the country, we have been actively filling that gap,” he said.
“An example is the establishment of Osona Village. The fund also recently approved a pension-backed home loan facility soon to be launched once all key stakeholders have signed. This will assist inclusive members in unproclaimed areas,” he added.
New mechanisms
“New mechanisms are needed to increase access to wholesale finance for the purchase of land and services, and to deepen housing lending to middle- and lower-income groups.
“The market could be opened by initiatives that allow retirement fund members to access accumulated withdrawal benefits as collateral for housing finance,” the World Bank said.
The Bretton-Woods institution found Namibia’s mortgage financing market was facing constraints to growth, particularly in the upper-income segment, highlighting the need for access to be availed to the middle- and low-income segments of the market.
Unequal access to mortgage financing
Namibia’s five commercial banks financed approximately 73 396 mortgages in 2020, but the World Bank noted that these mortgages were primarily granted to upper-income households.
“This number of mortgage loans as a proportion of total households is high by African housing market standards. However, these mortgage loans are mainly granted to upper-income households, so this figure also masks the unequal access to housing finance: In particular, the access of middle- and lower-income groups to mortgage finance is very limited,” it said.
The World Bank noted that Namibia’s four big banks required a minimum annual salary of approximately US$50 000 (N$790 000) to qualify for a mortgage and warned that mortgage lending in Namibia is currently facing elevated delinquency, primarily due to the impact of the Covid-19 pandemic on household incomes.
Government was also encouraged to fast-track the development of its urban development fund to supplement land funding for land delivery.
“On the public front, it will be key to finalise and implement the urban development fund, which can supplement funding for serviced land delivery through bilateral cooperation with development partners,” it said.
The bank noted that while Namibia’s banking fundamentals are generally solid, the capacity to extend housing lending is constrained by high existing ratios of housing lending to other types of debt and by dwindling household affordability.
The recommendations are contained in a country diagnostic titled ‘Creating Markets in Namibia’, and come amid plans by the Namibia Financial Institutions Supervisory Authority (Namfisa) to implement regulations as per the Financial Institutions Market Act that would only allow retirement fund members access to 25% of their pensions at retirement or resignation before the age of 55.
David Nuyoma, the CEO of the Government Institutions Pension Fund (GIPF) - the biggest pension fund in Namibia - welcomed access being granted to fund members to use their future retirement savings to finance their mortgages.
“The GIPF already introduced a mortgage housing financing facility in 2015 for members. As we recognise the housing unit shortage and the limited land servicing capacity by local authorities in the country, we have been actively filling that gap,” he said.
“An example is the establishment of Osona Village. The fund also recently approved a pension-backed home loan facility soon to be launched once all key stakeholders have signed. This will assist inclusive members in unproclaimed areas,” he added.
New mechanisms
“New mechanisms are needed to increase access to wholesale finance for the purchase of land and services, and to deepen housing lending to middle- and lower-income groups.
“The market could be opened by initiatives that allow retirement fund members to access accumulated withdrawal benefits as collateral for housing finance,” the World Bank said.
The Bretton-Woods institution found Namibia’s mortgage financing market was facing constraints to growth, particularly in the upper-income segment, highlighting the need for access to be availed to the middle- and low-income segments of the market.
Unequal access to mortgage financing
Namibia’s five commercial banks financed approximately 73 396 mortgages in 2020, but the World Bank noted that these mortgages were primarily granted to upper-income households.
“This number of mortgage loans as a proportion of total households is high by African housing market standards. However, these mortgage loans are mainly granted to upper-income households, so this figure also masks the unequal access to housing finance: In particular, the access of middle- and lower-income groups to mortgage finance is very limited,” it said.
The World Bank noted that Namibia’s four big banks required a minimum annual salary of approximately US$50 000 (N$790 000) to qualify for a mortgage and warned that mortgage lending in Namibia is currently facing elevated delinquency, primarily due to the impact of the Covid-19 pandemic on household incomes.
Government was also encouraged to fast-track the development of its urban development fund to supplement land funding for land delivery.
“On the public front, it will be key to finalise and implement the urban development fund, which can supplement funding for serviced land delivery through bilateral cooperation with development partners,” it said.
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