5 December 2012

Namibia: Millions of Loans in Arrears, Agribank Exceeds Targets

ABOUT N$282 million worth of loans were in arrears at Agribank at the end of November, exceeding normal business targets as well as the bank’s own “strategic” targets. Agribank yesterday described the situation as “unsatisfactory”.

The amount in arrears was 16% of Agribank’s total loan book, one per cent higher than the 15% set as the bank’s “strategic business target”. The normal business standard is 5%, Agribank said in a statement.

“The objective of the recovery strategy is to recover as much as possible of the arrears to bring it down to below the 15%-target as approved in the bank’s five year strategic plan. This should tremendously improve the liquidity of the bank to enable on-lending to the agriculture industry on a sustainable basis,” Agribank chief executive officer Leonard Iipumbu said.

Part of Agribank’s action plan for 2013 is to “aggressively implement” the recovery strategy to “at least 20% of the arrears”, Iipumbu said.

Reporting on the bank’s performance between January and November 2012, he said Agribank sent out payment demand notes of N$644 million in total to clients. Of this, 51% or N$323 million were notes for normal instalments, while N$321 million were for arrears.

The bank received N$250 million back – N$212 million for normal instalments due and N$38 million for arrears.

Agribank approved 3% more loans from January to November 2012 than the same period in 2011.

Loans to the agricultural sector totalled N$271,4 million from January to November this year, benefitting 605 Namibians. This boosted Agribank’s total loan book by 15% to N$1,95 billion.

In the process, Agribank helped to create and maintain 1 815 permanent and 2 723 temporary jobs.

The bulk of the loans, about 44%, went to previously disadvantaged Namibians to buy commercial farms. A total of 32 farms were bought to the tune of N$117,5 million, up 104% from the corresponding period in 2011.

“The leading contributing factor to the sharp increase in demand for farms can be attributable to favourable prevailing interest rate environment in the country and the relax in negotiations on the preferential right of Government on farms offered to the Ministry of Lands and Resettlement,” Agribank said.

A big chunk of the loans, about 28%, were geared to buy livestock, while 14% of loans approved were to take over agriculture debts from other financial institutions.

Commercials farms acquired under the Affirmative Action Loan Scheme (AALS) made up 10,4% of the total farms acquired during the period under review.

“This could be as a result of the escalation in farm prices to such an extent that farms have become unaffordable to most disadvantaged Namibians without any other source of income,” Agribank said.

About N$62 million worth of loans went to small-scale farmers under the National Agricultural Credit Program (NACP), benefiting 436 subsistence farmers.

Loans to co-operatives increased significantly during this reporting period to N$4 million. “This is an encouraging trend as co-operatives are established by small-scale farmers in rural areas with the Ministry of Agriculture, Water and Forestry (MAWF) providing guarantee from the Loan Guarantee Fund to cover for collateral,” Agribank said.

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