By Catherine Sasman
WINDHOEK
Despite recent bouts of volatilities in the global financial markets, the banking sector in Namibia remained sound during the second quarter, reported the Bank of Namibia (BoN).
The bank has for the first time released a report on the financial stability of the country, which assesses the stability of the financial system with regard to its role in facilitating economic processes and its ability to withstand adverse shocks.
During the first six months of this year, profitability of the banks continued to increase due to better lending margins and fee income, that further allowed banks to maintain their capital at healthy levels and set aside buffers.
This means that in the period, the banks’ capacity for managing unexpected strains has been strengthened, which means that the banking system does not represent a significant source of vulnerability, said Dr John Steytler, BoN’s Director of Research.
The four banks operating in the country have raised their assets by 1.7 percent to N$34 445 million during the period of review, which is a slight improvement of 1.4 percent in growth rate compared to the previous quarter.
Non-performing loans (NPLs) rose by 5.4 percent to N$802.8 million. The NPLs constitute mortgages (taking the largest portion at N$347 million), overdrafts (N$174 million), installment sales (N$115 million), and personal loans (N$73 million).
In the non-banking sector, the BoN report registered improved outlook in the long-term insurance industry, which is attributed to growth in total assets and investment incomes.
However, cautioned the bank, this sector faces daunting challenges posed by HIV/AIDS and a decline in net premium income.
“Overall, the outlook of the financial sector is that financial stability in Namibia does not appear to be under any foreseeable threats that could stymie the performance of the financial sector,” indicated the bank.
With regard to price development, there has been a tightening of monetary policy following the continuous inflationary pressure of the first six months of the year.
Inflation rose to an average of 7 percent, which are 0.9 and 2.6 percentage points higher than the same time last year.
Moreover, Namibia’s fiscal position has improved as is reflected in the deceleration in total debt of the Namibian Government (consisting of domestic and foreign borrowing).
This is due to the lower issuance of short-term domestic debt as well as a decrease in government guarantees.
At the end June, Namibia’s total stock in foreign debt was estimated at N$6.7 billion, representing a decrease of N$2.8 billion during the first three months of this year.
The decline, said BoN, was caused mainly by the private sector debt stock, which fell from N$5.2 billion to N$2.7 billion, supported by that of parastatals.