Namibia’s banking sector is too heavily focused on mortgage lending, limiting credit to businesses and constraining private sector growth, the International Monetary Fund (IMF) has warned.
In its latest assessment of Namibia’s financial system, the IMF found that nearly half of all private sector credit is allocated to housing, while lending to businesses remains limited. This, the Fund said, is stalling efforts to diversify the economy and reduce reliance on resource extraction.
“As Namibia seeks to diversify its economy and foster private sector-led growth, it is important to develop solutions that support sound lending to non-financial corporations,” the IMF stated in its report.
The Fund cited a 2024 World Bank enterprise survey which revealed that two-thirds of Namibian firms identified access to finance as the most significant obstacle to doing business—ranking above regulatory issues, infrastructure, and security concerns.
“Access to finance is the top obstacle identified by firms in the survey, surpassing other challenges such as regulatory burdens, security and stability, and infrastructure,” the IMF noted.
While mining companies tend to rely on intra-group funding from parent firms, the IMF said other businesses are struggling to meet collateral requirements, leaving many unable to secure loans from commercial banks.
To address these issues, the IMF has called on the Bank of Namibia to tighten lending standards while encouraging targeted credit growth in productive sectors. It specifically recommended the reintroduction of downpayment requirements for residential mortgages and the collection of borrower-level data such as debt-to-income ratios.
“Maintaining minimum lending standards is crucial for preventing future NPLs [non-performing loans],” the Fund warned.
The IMF also urged the Bank of Namibia to proceed with implementing a countercyclical capital buffer by the end of 2025. It further recommended introducing a systemic risk buffer for banks with high levels of sovereign exposure, noting that commercial banks remain vulnerable due to their significant holdings of government debt and dependence on wholesale funding from non-bank financial institutions.
“Namibia’s vulnerabilities to external and commodity price shocks and a fixed exchange rate underscore the need for a resilient financial system,” the IMF stated.
According to the Fund, wholesale funding from non-bank financial institutions accounted for 15% of GDP at the end of 2024. Despite the size of the country’s financial sector, credit to the private sector has continued to decline since the pandemic, leading to a widening negative credit gap.
“By the end of the analysis period, all methodologies indicated that Namibia’s credit gap was negative as of mid-2024,” the IMF concluded.
