Category: Financial Services

Analysis

The total credit extended to the private sector (households and businesses) amounted to N$109.7 million in May 2022, with businesses and households taking up to N$46,889 million and 62,596 million respectively. (See figure 1 below). Total credit extended to the private sector recorded growth of 4.5% in May 2022 from 3.8% recorded in April 2022. This was driven by credit uptake for mortgages and other loan advances for households and growth recorded in the commercial and retail services sector as well as commercial rental property space for businesses. (BON, May 2022).

On an annual basis, Total credit extended to businesses recorded a growth of 7.4% from 0.2% that was recorded during the same period last year. The growth was mainly driven by the demand for credit for installment leasing and other loans and advances. (See Figures 2 & 3). Total credit uptake for households declined from 3.7% recorded in May 2021 to 2.4% for May 2022. The decline was driven by low demand for overdrafts and mortgages and installment and leasing. (See figure 2 &4) This could be influenced by the rise in interest rates and inflation that suppressed the demand for credit by households. 

Figure 1: Total Credit Extended to the Private Sector vs. Annual % growth rates, (May 2021-May 2022)

Figure 2:  Annual % changes on credit extended to by businesses and households, (May 2021-May 2022)

Figure 3: Credit extended to Businesses, Annual % changes (May 2021-May 2022)

Figure 4: Credit Extended to Household Annual % changes (May 2021-May 2022)

Outlook

Given the scope of the current economic climate, with rising interest rates and high levels of inflation the private sector credit extension will remain subdued in the short to medium term.

Background

Namibia’s total outstanding private sector credit currently stands at N$105,3 billion. Total credit extended to the businesses sector stands at N$ 43,455.0 million and total credit extended to the households sector stands at N$ 61,279.7 million(June 2021). The current  largest uptake for credit in the country  is  households for mortgage loans (See figure 2 below). Additionally, instalment and leasing credit for both households and businesses sector  remain under pressure due to the general sluggish growth in the wholesale and retail trade sector and the overall domestic economy (See figure 3). Overall, the Private Sector  Credit Extension (PSCE) remains at historically low levels due to the persistent sluggish domestic economic activity, reinforced by the Covid-19 pandemic.

Analysis

The annual credit extended to Namibia’s private sector increased to 2.6% for June 2021  from 2.5% recorded for June 2020 (See figure 1 below). On a monthly basis credit extended to the private sector between May and June 2021 recorded a growth of 0.3%, that came from for mortgage loans. Despite the small uptick for mortgage loans for June 2021,  overall credit remains subdued due to low levels of economic activity, which translate into low earnings for individuals and businesses. The slow growth of credit is  observed in all credit categories  largely due to slower economic activity coupled with income uncertainties as a consequence of the impact of the Covid-19 pandemic. Meanwhile, instalment and leasing credit for businesses declined by 7.4% and for the households grew by 1.0% between June 2020 and June 2021.

Figure 1 : Annual % changes for the Private Sector Credit Extension

Figure 2: Annual % changes for the Private Sector Credit Extension

Figure 3: Households and Businesses Instalment sales Index YoY%

Outlook

There are no green shots on the horizon as the domestic economic activity remains subdued and there are no catalysts for economic growth at present. Households and businesses remain uncertain about future income and thus there is no confidence to take up credit, as a result we do not expect to see a recovery in credit extension in the short to medium term.