Deputy finance minister Maureen Hinda-Mbuende is not impressed with the profits made by commercial banks at the expense of households, who struggle to keep up with the escalating cost of living.
The deputy minister is worried about the increased financial burden on households, who are continuously tightening their financial belts in a high-interest-rate environment just to put bread on the table.
Delivering the keynote address on Tuesday at the launch of the Bank of Namibia (BoN) 2023 annual report, the deputy minister pointed out that the banking sector needs to do more, as the market cannot absorb continual interest rate increases.
“Is there a way that one can balance the way central banks adjust the repo rates to help the individuals or households to pay their mortgages on time and with less financial burden, considering alarming rates of property repossessions,” asked Hinda-Mbuende.
According to the BoN annual report, mortgage credit remained the largest contributor to total private sector credit extension (PSCE), representing 52.6%.
Non-performing loans (NPLs) increased by N$456 million to N$6.5 billion due to unfavourable economic conditions impacting the ability of households and businesses to service their debt.
“This position was underscored by a deterioration observed in non-performing categories of mortgages and other loans and advances, which increased by N$221.5 million and N$159.9 million, respectively. The deterioration in NPLs was due to the unfavourable economic conditions, the slow recovery in certain sectors, higher than normal inflation, and the interest rate environment experienced during the year,” reads the annual report.
Furthermore, the report stated that the total income in the banking sector amounted to N$12.8 billion, representing a growth of 15%. Net interest income expanded by 17.4% to N$7.9 billion, driven by higher interest income earned on the back of rising interest rates in 2022, which continued into the first half of 2023.
“Credit risk remains a key financial risk factor, while the banking sector continues to record higher profitability levels. Uncapped credit risk has the potential to negatively impact income through high provisions, which ultimately reduces the capital level,” said the concerned deputy minister.
The report stated that the central bank has been receiving complaints about high fees and charges levied by banking institutions on their customers.
New legislation makes provision for the finance and public enterprises minister to craft regulations relating to fees and charges imposed by banking institutions on their customers.
Draft regulations have been developed and shared with the banking industry for input. Once the consultation with the industry has been completed, the finance minister is expected to table the new regulations.
Dividends
At the same occassion, BoN distributed dividends of N$511.5 million to the State Revenue, demonstrating its commitment to national advancement.
The deputy minister emphasised the dividend’s critical function, describing it as a lifeline necessary for the nation’s progress.
“As Namibia’s population surges past the 3 million mark, the pressure on social services intensifies, making each financial injection even more crucial. These dividends aren’t merely financial transactions; they are catalysts for transformation, addressing critical developmental needs and fuelling the aspirations of our people,” said Hinda-Mbuende. – mndjavera@nepc.com.na