Namibia’s private-sector credit extension grew by only 1.8% year-on-year in June 2024, data from Simonis Storm Securities shows.
According to the research firm, this marks a decline from 3.2% in May 2024 and 2.9% in June 2023, with the continued restrictive financial conditions being a key reason for the reduced credit growth.
“When the repo rate exceeds the inflation rate, the cost of borrowing for businesses and households escalates. This results in higher interest rates on loans, mortgages, and other forms of credit, thereby dampening investment and consumption,” Simonis Storm researcher Halleluya Ndimulunde said.
The repo rate of 7.75% is higher than the June inflation rate of 4.6%. She noted that businesses may defer or cancel expansion plans due to the increased cost of financing, while households are likely to reduce significant expenditures and face higher monthly payment obligations.
Consequently, “the growth rate of private sector credit extension decelerates, as both borrowers and lenders adopt a more cautious stance—evident in the current credit growth trends in Namibia,” she added.
In June 2024, the decline was primarily driven by repayments from corporate borrowers.
Simonis Storm notes that the average private sector credit extension for the second quarter of 2024 was 2.2% y/y, which is higher than the 1.8% y/y recorded in the first quarter, but 0.1% lower than the second quarter of 2023.
Additionally, the year-to-date average private sector credit extension for the first half of 2024 was 2.0%, the lowest on record in our two-decade-long data series.
The corporate/business sector experienced growth of 0.5% y/y in June 2024, a significant slowdown from the 4.7% y/y recorded in May 2024, yet still above 2023 levels.
“This marks the second slowest credit growth uptake for corporates in 2024. The deceleration in June 2024 can be attributed to higher repayments in other loans and advances, as well as overdrafts, particularly within the commercial and services, fishing, manufacturing, and energy sectors, according to the Bank of Namibia (BoN),” said Ndimulunde.
Meanwhile, other loans and advances, which constitute 40.6% of total credit uptake by corporates, saw growth of 13.9% y/y in June 2024, down from 17.7% y/y in May 2024.
However, this still represents a significant increase compared to the same period last year.
“Overdrafts, accounting for 17.2% of corporate credit uptake, continue on a negative trajectory, with credit growth at -26.0% y/y in June 2024. Mortgage loan credit growth also remains negative,” said Ndimulunde.
Household credit uptake in June 2024 increased to 2.7% y/y, up from 2.2% y/y in the previous two consecutive months.
Ndimulunde said this represents the highest household credit growth in 2024, though it remains below 2023 levels.
“All categories within the household sector saw growth in June 2024, except for the overdraft category, where growth slowed. The overdraft category, which contributes only 4.0% to total household credit uptake, remains the least significant,” she said.
Furthermore, mortgage loans, which constitute a substantial 67.6% of household credit, increased to 1.9% y/y in June 2024, up from 1.5% y/y in May 2024.
“Other loans and advances, the second-largest category within household credit, rose to 0.8% y/y in June 2024, compared to 0.2% y/y in May 2024. Instalment and leasing credit also saw an increase, reaching 6.7% y/y in June 2024. Conversely, overdraft credit growth decelerated to 14.8% y/y in June 2024,” she added.
