Namibians borrow less – Business

Namibians are currently spending less on debt compared to what they spent in the past.

The Bank of Namibia (BoN) in its latest Financial Stability Report, released on Tuesday, says this is mainly because salaries have increased in line with inflation and the government is hiring more people.

“The ratio of household debt to disposable income changed from 43.3% in 2022 to 40.5% in 2023, partly due to inflationary wage adjustments, along with government hiring during 2023,” says the report.

In addition, household debt increased slightly (3.3%), compared to 2022 (3.4%).

This means it is growing at a much slower rate.

This slowdown in debt growth suggests that Namibians are more cautious about borrowing.

When it comes to corporate debt, there has been an increase driven by loans granted to foreign investors in the mining sector.

The report says the ratio of corporate debt to gross domestic product increased slightly, at 72.4%, compared to 70.7% a year earlier.

“This increase is manageable and the overall risk of excessive debt growth for both households and businesses is considered medium over the next year,” the report states.

THE BANKING SECTOR CONTINUES TO PROSPER

The banking sector has remained profitable thanks to interest income, even amid inflation.

The report said banks remained profitable and liquid, with sufficient funds to operate safely.

“The profitability position of the banking sector remained healthy on the back of higher net income, particularly interest income,” it says.

The total amount of assets in the banking sector grew by 6.1% to $174.4 billion in 2023.

However, there is concern over non-performing loans (NPLs) as the number of borrowers failing to repay loans has increased.

“Despite an increase in NPLs, the overall impact of banking sector risks did not appear significant during the review period.

“Therefore, it was not considered to pose an imminent threat to financial stability in Namibia,” the report says.

Stress tests also suggest that banks would survive the challenges.

Banking sector assets grew by 6.1%, slightly higher than the current inflation rate of 5.9%.

The total amount of assets of non-bank financial institutions (NBFIs) grew by almost 15% to N$419.4 billion in 2023.
Companies that offer loans and other financial services besides banks did well last year.

Its total assets grew by almost 15% to reach N$419.4 billion in 2023.

This means that even though interest rates were rising, people still wanted to borrow from service providers such as microlenders.

“Despite the contractionary monetary policy environment, demand for NBFI products remained strong in 2023. Furthermore, volatility in financial markets remains a concern for the short- and medium-term viability of NBFI subsectors. with mainly short-term liabilities,” the report says.

BoN Governor Johannes !Gawaxab says unstable electricity supplies and logistical constraints in South Africa continue to pose potential risks for Namibia.

He says Namibia’s financial system is healthy amid persistent inflation.

!Gawaxab says the financial system has been functioning efficiently, despite challenges in the economic environment.

He says the global trend of persistent inflation challenges policymakers.

“Yet despite this, there is a sense of optimism,” says !Gawaxab.

He says the bank and the Namibia Financial Institutions Supervisory Authority will continue to work to ensure a favorable environment for both financial institutions and consumers.

“Our goal is to create a platform where providers and consumers of financial products and services can meet and do business in a regulated, secure and stable environment,” says !Gawaxab.