Staff Reporter
Many local economists are generally optimistic about the domestic economic outlook for 2022, with some stating they “expect stronger growth of 3% in 2022, driven by a continued base effect recovery across the secondary and tertiary industries, bolstered by a stronger mining output”. However, the Bankers Association of Namibia (BAN) feels the nation should remain cognisant that the country experienced another year of economic distress in 2021.
In a statement released yesterday, the BAN noted that the muted recovery last year, following a quite devastating year prior, was in line with the Bank of Namibia’s projection of real growth in gross domestic product of 1,5% for 2021 against the contraction of 8,5% the previous year.
“It was also an indicator of the prolonged effects of that contraction and the toll of the pandemic on Namibian businesses and livelihoods, a toll seen not only in loss of bread winners but also in retrenchments, closures and, in turn, an increase generally in non-performing loans in residential and commercial property and asset-based financing,” read the BAN statement.
In accordance with the Quarterly Financial Information report released by the Bank of Namibia at the end of September 2021, non-performing loans (NPLs) at commercial banks rose to over N$7.2-billion against just over N$6.6-billion on 30 September 2020. The NPL ratios also rose to 6.9%, while overdue loans stood at 12.4% (September 2021: 9.8%)
Meanwhile, the BAN instituted additional regulations, such as BID 2 and BID 6, which serve to provide protection to individual and business borrowers when having to pay back funds borrowed, given the extensive procedures for dispute resolution and remediation, which must be followed before the bank can repossess a property.
Furthermore, the banking sector, led by the Bank of Namibia, responded proactively to the need of people economically affected by the pandemic, by implementing measures to help ease the economic burden of many Namibians, through no fault of their own, who suddenly had to contend with in order to try and mitigate the impact of the pandemic on the Namibian economy and to assist with the continuation of a functioning economy.
In this regard, the BAN said its members responded with decisive measures that included a repayment holiday scheme, which saw banks approve the majority of the applications received for relief, thereby contributing just over N$11 billion to the economy through this measure; as well as specific products and measures targeted at the SME sector to assist them through the pandemic. A further N$2.3 million was donated towards the purchase of oxygen tanks and the construction of additional Covid-19 capacity at hospitals. This does not include other contributions the banks have made in their individual capacity.
“The sole purpose of the banking system is to serve the real economy. Banks provide many different services that create economic value and contribute to social development. They act as intermediaries in financial transactions, facilitating the flow of funds between participants in the economy, and are also custodians of financial assets. Banks also ensure that capital is allocated effectively throughout the economy between providers of funds (savers and investors) and users of funds (borrowers). It goes without saying that banks have an immense duty of care towards depositors entrusting their money to the banking sector for prudent returns. Similarly, the bank-client relationship, and resultant confidentiality aspects related to contractual agreements, remains sacrosanct to the banking sector and will be protected to the fullest extent,” read the
statement.
The bankers association also emphasised that access to credit increases the supply of money in the system and has a multiplier effect on economic growth. Effectively, borrowers utilise their future income capacity to access current funding availability in the financial system, which then enables individuals and businesses to make investments and purchases and build infrastructure much faster than if they had to build up cash reserves first, before springing into action.
“It is important to note that banks, through the guidance of the regulator, ensure that both individuals and entities in these saving and borrowing interactions are protected, at the same time not exposing themselves to excessive risk, thus ensuring the safety and stability of the economy. This is the ultimate bedrock of just how solidly banks have been contributing to the growth of our economy for much longer than a century.”
Photo: BAN
Caption: Economic distress…Muted recovery last year, following a quite devastating year prior, was in line with the Bank of Namibia’s projection of real growth in gross domestic product of 1,5% for 2021 against the contraction of 8,5% the previous year. This is as Covid-19 continued to subdue economic growth. Photo: Contributed