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By: Nghiinomenwa Erastus

Theoretically, low interest stimulates borrowing both productive and for consumption however, the Namibian credit market has been defying such a notion.

Compared to a year ago, the exchange of credit between the business community and banks has reduced by more than half a billion (N$534m) by the end of August 2021.

This is according to the latest August 2021, money and banking statistics as collected by the banks of Namibia shows.

The money banking statistics capture private sector credit extension (PSCE), which is a money or borrowing line extended to businesses and households monthly and on a 12-month period.

PSCE is also a measure of confidence among businesses and households on the economic prospect, policy stance, and the overall macroeconomic environment in the months to come.

It has been seven months; business borrowing has been in the positive after the awful December 2020- where only N$64 million was extended to the business community.

The slow credit extension is depicted through monthly borrowing.

The Villager used the monthly changes in credit, as the representation of what has been loaned out monthly to assess the impact of low credit cost in the midst of uncertainty, low production, and retrenchment.

For the past eight months ending in August 2021, the banks have cumulatively extended N$1,8 billion to the business community.

A big share (N$804,6m) of this was given in January this year, through an overdraft, followed by a commercial mortgage, and then less than N$100m through instalment and leasing.

After the big allocation in January 2021, credit extended to business fell drastically to below N$320m.

The statistics also indicate that there are two months when no money, overdraft or leasing line was granted to the business community in the eight months.

The statistics do not, however, indicate if there were applications for funding from the business community and the banks did not approve.

In February the banks extended N$318,1m through only one credit line, the other loans and advances.

In March, no credit was extended to the economy, then in the following month (April), the banks extended 150,4m, through mortgages and allowing businesses to overdraft from their accounts.

No money, overdraft, or leasing line was granted to the business community to the business community in May by the banks.

In June 2021, N$238,4m was extended to businesses through various channels, except through overdraft.

The credit extension to the business community went drastically down in July 2021, with just N$69,4m given out through overdraft and instalment.

However, by the end of August 2021, it has recovered with N$261,7m borrowed by the business community.

Overall credit extended to the private sector slowed to 2% on an annual basis in August 2021, compared to 2,9% recorded in the prior month.

Julia Heita

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