Households drive N$119.2bn private sector credit
Accounting for N$66 billion
Growth in private sector credit extension edged slightly lower to 2.7% at the end of July 2023, from 3.0% recorded in June 2023.
Households were the main driver of N$119.2 billion credit extended to the private sector in July, accounting for N$66 billion, according to data provided by the Bank of Namibia (BoN).
Businesses accounted for N$45.5 billion, while foreigners accounted for N$7.6 billion.
Similarly, total private sector credit in June stood at N$N$119.2 billion, with households accounting for N$65.8 billion, businesses (N$45.8 billion) and non-residence (N$7.6 billion).
The credit growth extended to households was supported by an increase in demand for credit specifically for categories, overdraft credit, instalment and leasing as well as other loans and advances, BoN said.
Meanwhile, the contraction for businesses stemmed from repayments made in the form of other loans and advances and mortgage credit by corporates in the mining, wholesale and retail trade, financial services as well as fishing sectors, coupled with lower demand owing to tighter monetary conditions.
Looking at the cost of borrowing, on 14 June, the central bank hiked the repo rate by 50 basis points (bps) to 7.75%. At the fourth monetary policy announcement for the year on 16 August, the Bank of Namibia decided to keep the repo rate unchanged at 7.75%. The prime lending rate currently stands at 11.50%.
Expectations
According to Simonis Storm, In July 2023, Namibia's foreign currency reserves reached a record high of N$54.1 billion, up from N$52.9 billion. This increase justifies the recent decision by the Bank of Namibia to keep the repo rate and prime rate unchanged.
Based on this decision, it is likely that lending to businesses will remain stagnant for the rest of the year due to these high rates. Namibia's economic growth could be at risk due to limited lending to businesses as high interest rates make it less appealing for investors to borrow money. Banks have indicated that they are interested in funding projects as a way to boost lending to businesses and support economic growth, Simonis Storm pointed out.
On the other hand, the decision to keep rates unchanged could indicate a stable monetary environment which could lead to more credit uptake. However, given the current low private sector credit extension growth trends, stagnant lending as a result seems more likely to occur.
“The next monetary policy meeting is scheduled for the 25th of October 2023, which we expect BoN to either keep rates unchanged or hike by 25bps. If BoN decides on the former, it will signal the terminal stage of the hiking cycle, conveying stability in rates and may result in higher credit uptake by both businesses and households,” Simonis Storm [email protected]
Businesses accounted for N$45.5 billion, while foreigners accounted for N$7.6 billion.
Similarly, total private sector credit in June stood at N$N$119.2 billion, with households accounting for N$65.8 billion, businesses (N$45.8 billion) and non-residence (N$7.6 billion).
The credit growth extended to households was supported by an increase in demand for credit specifically for categories, overdraft credit, instalment and leasing as well as other loans and advances, BoN said.
Meanwhile, the contraction for businesses stemmed from repayments made in the form of other loans and advances and mortgage credit by corporates in the mining, wholesale and retail trade, financial services as well as fishing sectors, coupled with lower demand owing to tighter monetary conditions.
Looking at the cost of borrowing, on 14 June, the central bank hiked the repo rate by 50 basis points (bps) to 7.75%. At the fourth monetary policy announcement for the year on 16 August, the Bank of Namibia decided to keep the repo rate unchanged at 7.75%. The prime lending rate currently stands at 11.50%.
Expectations
According to Simonis Storm, In July 2023, Namibia's foreign currency reserves reached a record high of N$54.1 billion, up from N$52.9 billion. This increase justifies the recent decision by the Bank of Namibia to keep the repo rate and prime rate unchanged.
Based on this decision, it is likely that lending to businesses will remain stagnant for the rest of the year due to these high rates. Namibia's economic growth could be at risk due to limited lending to businesses as high interest rates make it less appealing for investors to borrow money. Banks have indicated that they are interested in funding projects as a way to boost lending to businesses and support economic growth, Simonis Storm pointed out.
On the other hand, the decision to keep rates unchanged could indicate a stable monetary environment which could lead to more credit uptake. However, given the current low private sector credit extension growth trends, stagnant lending as a result seems more likely to occur.
“The next monetary policy meeting is scheduled for the 25th of October 2023, which we expect BoN to either keep rates unchanged or hike by 25bps. If BoN decides on the former, it will signal the terminal stage of the hiking cycle, conveying stability in rates and may result in higher credit uptake by both businesses and households,” Simonis Storm [email protected]
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