Namibia’s non-bank financial institutions (NBFI) sector remained sound with total assets increasing by 14.6% to N$419.4 billion in 2023, official figures show.
According to the Bank of Namibia (BoN) Financial Stability Report (FSR) for 2024, the growth is despite the contractionary monetary policy environment and demand for NBFI products remaining strong.
BoN said volatility in the financial markets remains a concern for the short to medium-term viability of the NBFI subsectors with dominantly short-term liabilities.
The April 2024 FSR assesses the stability of the Namibian financial system and its resilience to internal and external shocks.
During the period under review, the banking sector remained liquid, profitable, and well-capitalised, with some concern for asset quality.
Banking sector assets grew by 6.1% to N$174.4 billion during the period under review, slightly higher than the prevailing inflation rate of 5.9%.
“The banking sector reported capital and liquidity positions well above the prudential requirements. Furthermore, the profitability position of the banking sector remained healthy on the back of higher net income, particularly interest income,” BoN Director for Financial Stability and Macroprudential Oversight Florette Nakusera said at the launch.
“Asset quality, as measured by the nonperforming loans (NPL) ratio, deteriorated in 2023 but remained below the crisis-time supervisory intervention trigger point of 6 percent”
Overall, Nakusera said the Namibian financial sector remained stable, sound, and resilient in 2023 despite moderate economic growth compared to 2022, as a result of the growth momentum in the domestic economy that stalled due to slower growth in the primary and secondary industries.
“The reduced momentum in the primary industry was due to the lacklustre performance of the diamond and agriculture sectors. Similarly, the growth in the secondary industry was underpinned by weaker global demand.
“The overall inflation for Namibia averaged 5.9% during the period under review, compared with 6.1% in 2022, in line with the contractionary monetary policy stance. The financial system nonetheless continued to function efficiently amidst these macroeconomic developments. The payment system infrastructure also continued to contribute reliably toward the financial system’s efficiency,” she stated.
In addition, Nakusera said household and corporate debt stock increased during the reporting period of 2023, although at a slower rate when compared to 2022.
She explained that the annual growth in household debt slowed marginally by 0.1 percentage point, to 3.3% by the end of 2023.
Meanwhile, the ratio of household debt to disposable income moderated from 43.3% in 2022 to 40.5% in 2023, partly due to inflationary salary adjustments coupled with recruitment by the government during 2023.
“The total corporate debt stock increased during 2023, mainly due to foreign direct investor long-term loans extended to subsidiaries in the mining sector. Consequently, the corporate sector’s debt-to-GDP ratio rose from 70.7% at the end of 2022 to 72.4% at the end of 2023. The short-term risks to financial stability emanating from corporate debt appear moderate given the lower growth estimated for 2023,” Nakusera said.
The National Payment System (NPS) and infrastructure also remained safe, secure, and efficient during 2023.
“The Bank of Namibia continued to fulfill its regulatory mandate as the overseer of the NPS in accordance with the Payment System Management Act, 2023 (No. 14 of 2023). Similarly, the Namibia Interbank Settlement System (NISS) maintained high system availability throughout 2023. Compared to 2022, total fraud in the NPS increased across all payment streams, primarily electronic fund transfers (EFTs) and e-money,” she added.
In addition, she said the increase in EFT fraud was primarily via phishing, while that in e-money payments resulted from incidents that were perpetrated via phone scams, especially targeting e-money wallets.
“To curb the rise in fraud and enhance cyber resilience, discussions are held at various NPS industry platforms for public education and awareness campaign initiatives and continuous improvement of the payment infrastructure. Despite these challenges, risks within the financial system emanating from the NPS remained broadly unchanged and well-managed,” Nakusera said.
Looking ahead, the BoN Governor Johannes !Gawaxab said the financial stability in Namibia is shaped around three key themes of climate change, cyber risks and the recent Financial Action Task Force (FATF) greylisting.
!Gawaxab highlighted that climate-related risk is a growing concern around the globe and has the potential to affect the financial system through physical and transition risks.
“To ensure that we are well prepared and globally aligned, the Bank joined the Network of Central Banks and Supervisors for Greening the Financial System. On the other hand, managing cyber risk is not merely about protecting information technology assets but is crucial for maintaining the overall stability and integrity of the financial system. The Cybersecurity Council together with the financial sector as a whole, are equally responsible for prioritising the mitigation and management of cyber risk,” !Gawaxab said.
He further elaborated that the recent Global Financial Stability Report equally highlighted cybersecurity as a material risk and recommended the implementation of a cybersecurity strategy, which Namibia recently endorsed.
“Thus, risks such as greylisting by the FATF have the potential to elevate systemic risks and undermine the outlook for financial stability in Namibia. Risks to financial stability in Namibia will be monitored accordingly under the advisory guidance of the Financial System Stability Committee and the direction of the Macroprudential Oversight Committee,” the Governor assured.
