The Namibia Deposit Guarantee Authority assets remained safe and secured for the year ended 31 December 2021. 

 The market value of the deposit guarantee fund increased by 3.8%, year-on-year, to N$10.3 million. 

The figures were contained in the 2021 Namibia Deposit Guarantee Authority (NDGA) annual report recently launched by Bank of Namibia. 

Emma Haiyambo, head of NDGA, said the fund’s growth in value was attributed primarily to N$5.079 million in premiums paid by member institutions and a total annual interest income of N$278 496 in 2021.

According to the board chairperson, Ebson Uanguta, the authority provides depositors, particularly small depositors, with the required safety net and protection. The authority became fully operational on 1 February 2020.

“The NDGA is mandated to manage the deposit guarantee scheme. Besides protecting a high percentage of depositors against the loss of their deposits by providing compensation when a member institution fails, the scheme also aims to enhance financial stability,” explained Uanguta. 

In addition, the scheme is meant to prevent panic withdrawals by assuring depositors of the safety of their deposits even in the event of a member institution failure, thereby reducing the likelihood of a systemic crisis, which could have far-reaching and devastating effects on the economy.

The scheme adopts a guarantee coverage limit of N$25 000, which is currently in effect. 

At this coverage limit, the scheme covers more than 90% of current depositors. 

The scheme, therefore, ensures that depositors have access to all or a portion of their funds in the event of a bank failure within a specified time period.

The report stated the banking industry maintained strong liquidity levels despite subdued demand for credit. 

The industry liquidity ratio stood at 18.3% at the end of 2021, higher than the 15.7% registered at the end of December 2021, and well above the prudential requirement of 10% of average total liabilities to the public. 

The liquidity position increased largely due to the weak demand for credit from both households and firms. 

“Despite operating in harsh economic conditions, owing to depressed economic activities, the banking industry reported growth in the balance sheet. A year-on-year comparison indicates growth in the banking industry’s total assets of 2.8% during 2021, while the growth during 2020 was just 1.3%,” reads the report.

Furthermore, the banking industry held adequate levels of capital and liquid assets, and it remained profitable in 2021, despite the persistent deterioration in asset quality. 

The return on equity for the sector stood at 13.9% by the end of December 2021, an increase from 10.9% at the end of 2020. 

According to the report, the capital adequacy of the banking industry stood at 15.7% in 2021, an increase from the 15.2% registered in 2020, and higher than the statutory minimum requirement of 11% of risk-weighted assets. 

Also, the non-performing loan (NPL) ratio moderated to 6.4% during 2021 from 6.44% in 2020. 

At this level, NPLs exceeded the crisis benchmark of 6%. 

The increase in the NPL ratio over the past three years has been driven by the continued pressure on household and business income owing to the Covid-19 pandemic.

- mndjavera@nepc.com.na