CHAMWE KAIRA
Non-performing loans (NPLs) in the agriculture sector are expected to improve in the next 12 months following drought relief measures announced by the Bank of Namibia in October.
Central bank governor Johannes ǃGawaxab said this week in response to questions that the bank had been concerned about non-performing loans in the agriculture sector, which in September last year stood at 8% but have now come down to 6%.
With the relief measures in place, ǃGawaxab expects NPLS in the agriculture sector to drop further in the coming 12 months.
“Any non-performing loan is a critical risk in the stability of the financial system. We all know that high NPLs can erode bank profitability, can weaken capital buffers and can impair lending and ultimately they can threaten profits. That is what NPLs can do if you don’t manage them. Currently NPLs are around the 6% level, and we have a bridging model for NPLs over the next four quarters, and the projection is that NPLs will be below 6%,” he said.
The Bank of Namibia announced in October the implementation of policy changes to address economic and financial stability challenges resulting from the ongoing drought in the country.
President Nangolo Mbumba issued the determination after declaring a state of emergency on May 22.
The government issued the determination to provide credit-related drought relief policy measures to help farmers and agricultural business owners who are facing financial difficulties due to the drought.
“In terms of this determination, banking institutions are required to implement relief measures, including the restructuring of loans, the granting of loan moratoriums, and emergency funding under preferential terms. This will ease the financial burden on affected clients while helping to stabilise the agricultural sector amidst the persistent drought,” the central bank said.
Agricultural clients who can show that the drought that has persisted in Namibia for the past few years has severely affected them will receive relief from the determination.
“The determination is a reflection of the Bank’s ongoing commitment to supporting the agricultural sector during these challenging times by ensuring that local farmers and agricultural businesses have the financial flexibility they need to navigate the drought crisis. The determination will remain in force until October 2026, subject to continuous review by the bank,” the central bank said in October.
