Windhoek
Namibia’s overall ratio of household debt to disposable income increased to 83.9 percent in December 2014 from 82.9 percent in December 2013.
While the increase might not seem like much it is still enough for the Bank of Namibia (BoN) to call for comprehensive monitoring and targeted policy interventions to address the growth in household indebtedness.
“If left unchecked, growth in mortgages, instalment credit and overdrafts would lead to systematic risks in the financial system,” warned Ebson Uanguta, Deputy Governor of the Bank of Namibia on Monday during the launch of the 2015 Financial Stability Report (FSR).
Also at the launch of the 2015 FSR was Kenneth Matomola, Assistant Chief Executive Officer of the Namibia Financial Institutions Supervisory Authority (Namfisa).
The latest FSR indicated that corporate debt (as a share of gross domestic product (GDP)) increased due to growth in foreign private sector debt coupled with the depreciation of the Namibia dollar against other major currencies.
“The increase in corporate debt was, however, largely ascribed to borrowing by companies which earn foreign exchange and thus may not pose a major risk to the financial stability of the country, at least in the short to medium-term. Nonetheless, the acceleration in the growth rate of large exposures in the banking sector, mainly due to the mining, fishing and tourism sectors warrants monitoring to mitigate concentration risk,” noted Uanguta.
He added that financial stability indicators for the banking sector remain at comfortable levels by international standards, although he noted that some structural patterns of the balance sheets require monitoring.
“The resilience of commercial banks is regularly tested and the current stress testing results indicate that commercial banking institutions are able to withstand a shock to the banking system,” said Uanguta. He continued that the concentration of banking assets in mortgages remains high and needs continuous monitoring in light of the high level of household indebtedness.
In addition, this latest report shows that since the last FSR the balance sheets of non-banking financial institutions (NBFIs) remain healthy and do not pose systematic risks to the country’s financial system.
“Overall, growth of the assets of NBFIs was positive. This is expected to continue in the next six months. Since the last FSR, the capitalization of provident institutions was adequate to ensure solvency and funding levels are in excess of those required by statute. These levels are sufficient to withstand the shocks and risks to which these institutions are exposed,” said Uanguta.