To further support domestic economic recovery underway, the Bank of Namibia (BoN) has decided to continue with some of the relief measures.
These measures were instituted to cushion households and businesses from the worst impacts of the Covid-19 pandemic and its related restrictions on economic activities.
The new measures provided came into effect on 2 April 2023 and are valid until 1 April 2024.
The unprecedented measures taken by the bank included loan repayment moratoriums, liquidity relief measures and the relaxation of the capital conservation buffer, as well as the concentration risk/single borrower limit.
BoN spokesperson Kazembire Zemburuka said these relaxations allowed commercial banks to extend much-needed credit to economic sectors most affected by the pandemic and its aftermath.
He stated that during 2022, the banking industry received a total of 122 819 applications for repayment holidays.
The value of loan approvals indicated that individuals dominated the approvals with a total of N$2.3 billion in 2022, compared to N$4.9 billion in 2021.
“This was followed by the real estate and business services sector with N$1.2 billion, trade and accommodation with N$731.1 million, and the mining sector with N$285.1 million,” Zemburuka stated.
Since its issuance in 2020, the determination of policy changes in response to economic and financial stability challenges, following the fallout of the Covid-19 pandemic, was extended in 2021 and 2022 until 31 March 2023.
Kazembire explained the policy interventions have gradually alleviated the impact of Covid-19 on the banking industry.
However, despite the resumption of normal business activities, some of the key sectors of the economy that were hit hard by Covid-19 still require more time to recover from the impact of Covid-19 levels.
This, Zemburuka explained, necessitated the need to revise the determination to extend the period of the credit relief measures provided to banking institutions and their clients to enable enhanced credit relief measures introduced late last year to take effect.
“Primarily, the desired objective of reviving the various key sectors where economic activity was downscaled by Covid-19 restrictions, such as tourism, hospitality and the construction industry will take time. Therefore, the bank has extended credit relief measures to enable banking institutions to continue providing relief to the clients impacted by Covid-19 and ensure that key economic sectors can recover from the impact of the pandemic”.
Moreover, Kazembire said, there has been a postponement of limits imposed for total exposures outstanding at any time to a single person or a group of related persons in terms of the determination of these limits on exposures to single borrowers, large exposures and concentration risk until 1 April 2024. The limit is currently set at 25% since December 2019.
“With this postponement, the limit will still stand at 30% of a banking institution’s capital funds. This postponement will provide banking institutions with further scope to lend to the most vulnerable sectors of the economy during these challenging times. As previously stipulated, borrowers who are granted payment reliefs, and who are repaying their loans as agreed, should not be reported to the credit bureaus for purposes of credit reporting,” the BoN spokesperson urged.
This measure, he said, is to ensure a payment holiday does not adversely affect borrowers’ credit records for the duration of the payment moratorium. However, since the banking institutions’ liquidity position remains healthy, and any concerns regarding liquidity risk are muted, the liquidity relief measures that applied previously are no longer necessary.
Therefore, banking institutions are from now on required to comply with the liquidity requirements set in the determination of minimum liquid assets.
Similarly, Zemburuka said, the capital conservation buffer, which enabled banking institutions to use the capital they have built up during better financial and economic conditions for lending purposes, is no longer required, as banks hold capital above the minimum capital requirements plus conservation buffer.
“BoN will continue to closely monitor the implementation of these relief measures by banking institutions to ensure they achieve the desired objectives and that the financial system remains stable,” Zemburuka stated.