Total credit surpasses N$60 billion
In excess of N$60 billion in private credit has been extended to date while a 2.27% increase in credit month-on-month was recorded for November 2014 alone. This surge in private credit continues despite attempts by the Bank of Namibia to curtail spending. According to IJG, 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, and the fourth such consecutive record, as high growth continues to be seen off an ever increasing base.
Of the total credit extended over the 12-month period, more than half the credit was absorbed by households while the remainder went to businesses. In a nutshell, households pocketed N$4.7 billion in new credit while businesses received N$4.5 billion. Said IJG, “Credit extension to households expanded by 1.52% on a monthly basis and 13.3% on an annual basis in November. The growth in credit extension to households can be ascribed largely to prolonged and historically low interest rates, allowing for the relatively cheap uptake of credit by interest sensitive households. While interest rates have now started to increase, the transmission mechanism is relatively slow, particularly when interest rate increases are small, as have been the recent hikes.” “Credit extension to corporates grew by 20.14% year-on-year in November, down from 21.37% in October but still meaningfully higher than credit extended to households. Mortgage loans, the largest component of credit extended to corporations, grew by 3.35% for the month. Overdraft facilities, the second largest component, grew by 7.81% and now amounts to more than 25% of the total credit extended to corporations. Overall for the month credit extended to corporations rose 3.41%. The continued growth in Private Sector Credit Extension is indicative of the strength of the Namibian economy even amid global divergence and despite South African economic weakness,” IJG said. Despite attempts by the Bank of Namibia to reign in spending by way of rate hikes of late, further growth in credit is expected.