The Namibian banking sector witnessed a significant surge in total outstanding loans, reaching N$112.7 billion in the first quarter of 2024, latest data shows.
This marked a notable increase of N$646.9 million compared to the same period in 2023. However, non-performing loans (NPLs) now account for 6.1% of total loans, according to the latest data from Cirrus.
A non-performing loan is defined as one where the borrower has failed to make a payment for over 90 days (three months) or more.
Due to this prolonged period of non-payment, the loan is categorised as non-performing, indicating a greater likelihood that the borrower may be unable or unwilling to repay it.
According to Cirrus’ Assistant Fixed Income Portfolio Manager, Amy Walters, individuals account for the largest share of total loans, representing 43% at N$49.3 billion of the total in outstanding loans.
“Of the total individual loans outstanding, 7.1% are non-performing – highlighting the strain on households as many people are struggling to pay back their loans,” she said.
She further explained that in the business sector, the health of loans varies significantly across industries.
The construction sector has the highest percentage of non-performing loans at 14.6%, while the agriculture and hunting sector follows with 8.9% of loans classified as non-performing.
The manufacturing and trade and accommodation sectors also show high levels of non-performing loans, at 7.7% and 6.5%, respectively.
“Construction has been ailing for the past decade as the large scale infrastructure slowed down (public and private), while the Namibian economy has struggled over the period as well. The agriculture and hunting sector has repeatedly been impacted by drought (again this year), while the trade and accommodation sector is still recovering from the impact of COVID-19 lockdowns and travel restrictions,” she said.
Similarly, according to Cirrus’ economic outlook, mortgage loans remain the largest component of overdue loans, accounting for 51.6% of the local credit book in arrears.
This is followed by overdrafts and other loans and advances at 18.8% and 17.5%, respectively. Despite the overall increase in outstanding loans, there has been a notable improvement in overdue loans, which stood at N$15 billion as of 31 March 2024, down from a high of N$15.1 billion in June 2023.
“The material improvement, according to the Bank of Namibia, was due to a Government group scheme,” the report said.
“A material amount was previously in arrears (due to mismatch between payroll installments and the interest rate adjustment installments) which was subsequently updated and the net difference was capitalised. Additionally, there was an erroneous inclusion of overdue loans in the 1-29 days past due exposure, albeit this was a relatively small amount that should have been in the non-overdue bucket and has since been corrected.”
