Justicia Shipena
Financial experts and civil servant union representatives have warned that the newly endorsed Pension-Backed Home Loan (PBHL) scheme could push public workers deeper into debt if not properly managed and aligned with wage growth.
The ministry of finance endorsed the scheme on Wednesday, describing it as a step toward affordable housing for government employees.
Teachers Union of Namibia (TUN) secretary general Mahongora Kavihuha said the scheme is simply “another loan product” and fails to empower workers.
“Yes, I’ve been saying all along, buying a house is a payslip issue; your income determines what you qualify for. If the pension-backed loan is not matched to the wage growth of civil servants, it will only contribute to household indebtedness,” he said.
Despite the loan’s lower interest rate compared to traditional loans, Kavihuha asserted that it still imposes a financial burden.
“A loan is still a loan,” he said, warning that such schemes often ignore the Labour Act.
“The Labour Act, under Section 12, clearly states that no employee should take home less than one-third of their salary. This law is second only to the Constitution in protecting workers, and it should not be undermined by loan schemes that don’t consider its provisions.”
He said the scheme mirrors what commercial banks already offer.
“To us, as the labour movement, this is just another bank scheme. What we are fighting for is the ability for workers to access a portion of their own pension money to invest directly, whether it’s to build a house, expand an existing property, or invest in a business. That’s empowerment.”
Kavihuha advocated for treating workers as unlisted entities and granting them direct access to pension funds.
“We see our members’ money being given to companies all over, and yet workers can’t use it for themselves? Why can’t we, as individuals or communities, access that money through proposals and invest in our future?”
He demanded a shift in the management of pension funds.
“We are not saying throw away the idea of housing support. We’re saying give workers real control over their pension savings; let them use it to build wealth, not just more debt.”
When finance minister Ericah Shafudah endorsed the scheme in the National Assembly on Wednesday, she said it is being implemented with the Namibia Financial Institutions Supervisory Authority (Namfisa) and the Government Institutions Pension Fund (GIPF) and is underwritten by the office of the prime minister.
According to the GIPF 2024 annual report, the Fund had invested in the servicing of 5,884 plots, constructed 7,840 housing units, and financed 3,286 house purchases through the First Capital Housing Fund.
“This initiative is part of our commitment to improving access to decent and affordable housing, particularly for civil servants who cannot meet conventional loan requirements,” said Shafudah.
The scheme allows GIPF members to use a portion of their pension savings as collateral to buy property or land, build or renovate homes, settle existing home loans, or improve basic housing.
Shafudah said the scheme is grounded in the Pension Funds Act 24 of 1956.
She said administrative and payroll arrangements are being finalised with GIPF to allow for a smooth rollout.
She said civil servants will soon receive information about eligibility, application processes, and terms.
Borrowing rate
The loan interest rate will be the Bank of Namibia’s repo rate plus 2.5%. With the current repo rate at 6.75%, the PBHL scheme offers an interest rate of 9.25%.
“The right to shelter is a fundamental human right. This scheme is a step forward in tackling housing inequality and empowering public servants to own homes and live with dignity,” Shafudah said.
She encouraged responsible borrowing and thanked stakeholders for their cooperation.
Economist Josef Sheehama said the PBHL scheme has both advantages and risks.
“Currently, the scheme is pegged at the Bank of Namibia’s repo rate plus 2.5%. With the repo rate at 6.75%, this means members will pay an interest rate of 9.25%, which is about 2.25% lower than the standard mortgage lending rate of 11.5%. That makes it a more affordable option for borrowers,” he said.
Sheehama warned that if borrowers default, the pension fund will have to settle the loan, putting retirement savings at risk.
“This could undermine long-term financial security. Additionally, if the individual changes jobs, the home loan must either be repaid or transferred to a new employer and pension fund, which adds administrative complexity and risk.”
He said the floating interest rate tied to the repo rate could create uncertainty.
“It would be ideal if the interest rate were fixed. This would give borrowers repayment certainty, especially in a high-interest environment. However, if rates fall, members would lose out on potential savings. Education and financial literacy are key to ensuring that members understand the full implications and make informed decisions.”
Sheehama said the scheme might also encourage people to borrow more, seeing their pension as a safety net. “While this is a commendable initiative that could help many Namibians secure housing, it should not come at the expense of their future financial well-being.”
The endorsement comes as GIPF said last week that the rollout of the pension-backed housing loan scheme is near completion.
The Fund had 97,512 active members in the 2023 financial year, contributing N$4.8 billion, a 3% rise from the previous year. Benefit payments fell by 9% to N$6.3 billion.
GIPF’s assets were valued at N$167 billion in the 2023/2024 financial year. Of this, N$117.1 billion was managed by investment managers, N$10.1 billion was held as direct investments, and N$40 billion was in the treasury portfolio.
The Fund earned N$18 billion in returns, up from N$6.5 billion in the previous year.
