By: Nghiinomenwa Erastus
By the end of the second quarter (2021), depository corporation institutions (banks) domestic assets were valued at N$131, 48 billion.
Out of those billion valued assets, N$61, 43 billion are loans/funding lines extended to individuals in the domestic economy.
While the business community has been awarded loans and credit lines valued at N$44, 07 billion by the second quarter.
The Bank of Namibia (BoN), Quarterly Bulletin – September 2021 revealed.
Traditionally before the emerging of asset managers, venture capital and equity financier, commercial banks have been instrumental in financing economic activities through lending and still do.
Businesses and households use the funds for production and consumption purposes- theoretically, households borrowing is known for consumption purposes.
However, in Namibia, the banking statistics show that individuals mostly borrow to buy residential dwellings.
As a result, the residential loans to households amount to N$42,9 billion according to the banking statistics for August 2021- almost equivalent to the loans and credit lines extended to the business community.
“Households and others maintained the largest share of credit advanced to the various economic sectors at the end of the second quarter of 2021,” the bulletin revealed.
On an annual basis (12 months), credit extended to the combined economic sectors rose by 3,8% to N$100,4 billion at the end of the second quarter of 2021.
With more than half (54,2%)of it extended to households and others, an increase from last year’s same period exposure of 51,9%.
Beyond households, the banks have funded the commercial and services sector taking the second lion’s share of 31% of the credit extended by the end of the quarter.
An increase from last year, second-quarter level of 29,3%.
Households and commercial and services make up around 80% of all the credit extended to the private sector, according to the bank of Namibia analysis.
The banks have also extended credit to other sectors of the economy- out of the money loaned out, building and construction was the third biggest beneficiary by getting 5,4% by the end of the second quarter.
One trend observed from the data is that the share of credit advanced to the agriculture and the building and construction sectors decreased to 3,9% and 5,4%, respectively.
According to the central bank researchers, the agriculture sectors continued to be affected by low livestock numbers and marketing activity.
Furthermore, the construction sector recorded a decrease in construction activities, hence a decline in transactions and demand for credit from these sectors.
By the end of the second quarter, agriculture got only 3,9% of the N$100,4 billion extended.
While manufacturing got 2,9% of the funds, maintaining the same level as the second quarter of last year.
Compared to last year’s fishing and mining and quarrying, the commercial banks have slightly improved their funding for these sectors by allocating 1,4% and 1,2% to the two sectors, respectively.
By the end of the second quarter (2021), liquidity as commercial banks’ ability to fund increases in assets and meet obligations as they come due without bearing undesirable losses has worsened.
The bulletin indicated that the banking industry’s overall liquidity position posted a level of N$1,3 billion on average during the second quarter of 2021, compared to N$3,5 billion a year earlier.
Cross-border transfers mainly explained the decline in investment managers’ liquidity levels and lower domestic payments by the government.
Furthermore, low interests made higher interest-bearing instruments more attractive, given the lower uptake of credit from the private sector. Email: firstname.lastname@example.org