N$9.4 billion in credit extended in 2014
Credit extended to the private sector increased by N$1,168 million or 1.78%, in October 2014, taking total credit outstanding to N$66.8 billion. On an annual basis Private Sector Credit Extension (PSCE) growth accelerated by 0.1 percentage points, to 16.4%.
A net total of N$9.4 billion worth of credit has been extended over the last year, the highest level of net issuance seen over a 12 month period to date. Of this N$9.4 billion, approximately N$4.6 billion was issued to businesses, while N$4.6 billion was taken up by individuals.
According to IJG, credit extension to households expanded by 1.1% on a monthly basis and 13.2% on an annual basis in October. The growth in credit extension to households can be largely ascribed to prolonged and historically low interest rates in Namibia, allowing for the relatively cheap uptake of credit by interest sensitive households.
In its latest report on credit extension, leasing transactions and other claims were the only sub categories to reflect negative growth month-on-month. Large growth was however witnessed in other loans and advances, expanding as much as 3.54% followed by mortgage loans which rose 1.03% month-on-month.
“Mortgage credit is still by far the biggest component of credit extended to households, contributing 66%. Mortgage credit continues to grow on the back of low interest rates and a strong local economy.
Instalment credit makes up the second largest component of credit extended to households (16.4%). Instalment credit is often used to purchase consumer goods and could be seen as a non-productive utilization of credit. If this number continues rising in a rising interest rate cycle it could put pressure on household financial health. However we do not see an interest rate hiking cycle being implemented as soon as we previously did,” said IJG, citing weaknesses witnessed in South Africa, Europe and slowing growth in China. “Credit extension to corporates grew by 21.37% year-on-year in October, up from 20.28% in September. Mortgage loans, the largest component of credit extended to corporations, grew by 2.56% for the month. Overall for the month credit extended to corporations rose 2.82%. The continued growth in PSCE is indicative of the strength of the Namibian economy even amid global divergence and South African weakness,” said IJG.
Added IJG: “Looking forward we expect to see further strong credit growth. Real income growth is expected to remain elevated given the expansive economic conditions that are still prevalent within Namibia which will continue to reinforce demand for credit.”