Namibia: More Than 22,000 Plead With Banks for Mercy

After the Bank of Namibia (BoN) facilitated a loan repayment moratorium, commercial banks received 22 506 applications seeking temporary repayment holidays.

Out of the 22 506 some 12 170 were granted temporary breaks.

This is according to central bank governor Johannes !Gawaxab during his keynote address at the BoN's recent stakeholder seminar.

!Gawaxab discussed additional measures the central bank initiated to supplement the repo rate cut after it failed to make a dent in private sector credit uptake.

"In addition to cutting the repo rate, the Bank of Namibia implemented a set of macroprudential and liquidity policy measures to soften the blow of the potential impact of the Covid-19 outbreak on individuals and businesses," he said.

According to central bank statistics for July 2020, individuals and businesses owe commercial banks N$99,3 billion, with households having a chunk of it locked up in mortgage loans.

The governor said policy measures entailed a loan repayment moratorium, liquidity relief measures, and the relaxation of the capital conservation buffer and concentration risk/single borrower limit.

Since the implementation of these measures in March/April 2020 the banking industry has collectively approved 10 071 of its clients' requests for repayment holidays by July.

By the end of September, approved applications increased to 12 170 out of 19 308.

INDIVIDUALS STRUGGLE

Applications approved originated from various sectors of the economy impacted by the virus pandemic.

!Gawaxab said the number of loan approvals per top five sectors indicated that individuals, however, dominated approvals.

Of loan repayments extended by commercial banks, 8 101 were to individuals by the end of September this year from 6 563 recorded on 15 July.

Individuals are followed by the real estate and business services sector with 1 258 in September - an increase from 1 263 from July.

It does not come as a surprise that the real estate sector is part of those seeking a repayment holiday, with around N$53 billion of commercial bank loans extended to the property sector.

Early this year The Namibian reported that by the end of 2019, local commercial banks reported that N$5 billion in loans extended no longer generated income.

Most of these loans - worth N$3,3 billion - were provided to buy houses or fund commercial properties.

The trade, tourism and hospitality sectors stood at 1 028 during September, up from 896 recorded in July, while the transport sector stood at 428 loan approvals in September, which is higher than the 392 recorded in July.

Construction had 385 loans approved for September - up from 324 recorded in July 2020.

Despite the mining sector being declared as providing an essential service during the lockdown, banks also received 34 new applications from mining companies, amounting to N$391,6 million until September.

Other sectors that were granted loans by 31 September were the agriculture sector with 194 approvals, the electricity, gas and water sector with 98 approvals, and the finance and insurance sector with 157 approvals.

Government services stood at 31 loan approvals, manufacturing at 114, wholesale and retail at 17, the fishing sector at nine approvals and other sectors at 316.

UNRESPONSIVE REPO

"Despite successive reductions in the repo rate since March 2020, private sector credit extension (PSCE) remained subdued," said !Gawaxab.

Average annual growth in PSCE from April to August 2020 stood at 2,7%, from 7,3% during the corresponding period in 2019.

The key factor underpinning weak PSCE was the contraction in credit extended to businesses because of repayments and write-offs made during the period under review.

On average, credit to the corporate sector contracted by 1,1% year-on-year from April to August this year from growth of 8,1% in the same period last year.

Growth in credit to households similarly slowed to 5,6% from 7% over the same period.

The governor said all other credit categories registered subdued growth rates from April to August, compared to the same time in 2019.

Various measures were implemented by the government to reduce the direct impact of Covid-19 and contain the spread of the virus, which had a significant impact on various sectors of the economy.

"The economy was already weak prior to the onset of the Covid-19 pandemic, and therefore, the Bank of Namibia had to act very quickly," said the governor.

By the end of the year, the economy is expected to lose around 7,8% of production compared to 2019.

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