5 December 2018

Namibia: Private Sector Borrowing Up

Consumer borrowing increased during October 2018, with private sector credit extension standing at 7% year-on-year compared to 6,6% seen in September 2018.

The growth was driven by an uptake of short-term credit facilities by businesses in the services, fishing, manufacturing and mining sectors during the period under review. This was outlined in the Bank of Namibia's money and banking statistics for October 2018 and the government database for November 2018.

According to banking statistics, growth in total credit extended to businesses continued increasing during October 2018, with annual growth in credit extended to businesses standing at 7,1% at the end of October 2018, compared to 6% at the end of September.

"Credit extended to the household sector slightly rose at the end of October 2018. Total credit extended to the household sector rose to 7% during October 2018, from 6,9% reported at the end of September 2018. The meagre increase in credit extended to the household sector was underpinned by a higher uptake of mortgage credit coupled with the continued increase in other loans and advances during the month under review," the statistics noted.

During October 2018, overdraft credit increased to 7,2% on an annual basis, compared to 2,9% in September 2019. The steep increase was attributed to a higher demand for overdraft credit by the business sector.

Moreover, annual growth in other loans and advances increased during the period under review, standing at 24,1%. However, installment sales further decreased to 6,9% in October 2018, while mortgage credit stood at 6,4%.

An analysis conducted by Simonis Storm yesterday on the statistics noted that debt was channelled through overdraft facilities in addition to other loans and advances that increased by 7,2% and 17,7%, respectively during the period under review.

Meanwhile, unsecured lending maintained an upward trend, increasing to 13,7% year-on-year (y-o-y) in October 2018 compared to a 4,7% growth in the prior year, the Simonis analysis said.

Simonis added that total domestic debt increased by 17,5% y-o-y in November 2018 but at a slower pace compared to 24% the prior year. Total domestic debt stood at roughly N$53 billion in November 2018.

"This increase constitutes a 23% y-o-y increase in treasury bills (TB's) and inflation-linked bonds that recorded a rise of 31,4% y-o-y in November 2018. Bonds picked up steam in November, increasing by 11,6%. We attribute the increase in domestic instruments to the repatriation of funds for domestic asset requirements coupled with excess liquidity from diamond sales," the analysis read.

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