Increased credit uptake good but…

 

 

 

 

The increased growth of credit uptake by the business community is good news but it remains to be seen whether this demand can maintain the momentum since the economy is still facing headwinds, a local economist has said.

 

Since the advent of the economic recession, the private sector has been reluctant to take up credit for investments in spite of repeated calls by central bank governor, Iipumbu Shiimi to do so.

 

Shiimi is on record lauding a slow uptake of credit by indebted households, rather urging for businesses to do so and help the economy kick-off.

Lately, local brokerage firm, Simonis Storm Securities hinted that the slow-down in credit uptake was symptomatic of a deterioration by the private sector in participating in economic activities.

 

This was seen as coming back to haunt collection of tax revenue yet this time, total credit extended to the private sector rose by 1.5% from N$93,409 million in July to N$94,783 million in August 2018.

Owing to this sudden development, an economist at the Economic Association of Namibia, Klaus Schade remarked, “The overall stronger increase of credit extended to businesses than credit extended to individuals is good news since credit to individuals is often used for consumption that does not yield an economic return.” 

After a decline in credit extended to businesses by N$159 million in July compared to June, demand by businesses increased strongly by N$886 million or by 2.4% in August compared to July.

From their observation, EAN said this was the strongest month-on-month growth since November 2015 (2.6%).

Credit extended to individuals grew by N$452 million in August, which was slightly below the growth in July by N$473 million.

 On a month-on-month basis, credit extension slowed down from 0.9% in July to 0.8% in August.

PSCE to businesses increased by 4.3% since the beginning of the year and to individuals by 3.5%.

Both growth rates exceed growth experienced in August 2017 of 3.7% and 2.6% for businesses and individuals respectively.

Credit extended to individuals accounted for 58.6% of total credit extended to the private sector compared to 40.1% extended to businesses.