Finance minister urges public to make proper decisions

WINDHOEK: Finance Minister Saara Kuugongelwa-Amadhila has urged the public to look closely at all options available before taking major financial decisions, especially when acquiring houses.

She said this whilst tabling the Pension Funds’ Amendment Bill in Parliament on Tuesday.

This Bill aims to authorise pension funds to grant loans and provide guarantees for members to acquire homes in communal areas.

Namibia is currently faced with an acute shortage of houses, especially for the poorer segments of the population due to the high costs of housing and restricted access to finance.

“If you do not look at the options available to you, you will end up in a situation where a more informed person would end up borrowing at 8 per cent from a bank, whilst a less-informed person would borrow at 9.2 per cent from their pension fund,” explained the minister.

She said experience had shown that because the collateral of a pension benefit is easier for a financial institution to recover in case of a default, they are more prepared to offer better lending terms than if one collateralises one’s loan with a fixed property.

“If you borrow from a bank and you use your pension benefit as collateral rather than a house as collateral, you are likely to get better borrowing terms,” Kuugongelwa-Amadhila advised.

She explained that when a person defaults, it is easier for the financial institution to collect the pension benefits and it is more cost-effective for them, adding that these institutions do not have to incur a lot of costs.

“However, if you default on a loan with a house as collateral, the financial institution first has to put up the house on the market, get a buyer and hire someone to facilitate the process, which is expensive,” the minister stated.