Rikus Grobler | Jun 20, 2017 | 0
Stability, soundness and profitability of the financial system exploitive
Many Namibians still struggle with debt despite a recent joint report by the Namibia Financial Institution Supervisory Authority and the Bank of Namibia giving the financial sector a clean bill of health.
Namibian market analyst and Managing Director of Twilight Capital, Mally Likukela said that stability, soundness and profitability of the financial system should be evaluated against social, economic value and benefits to household borrowing as any mismatch can give rise to the suspicions of possible exploitations.
His opinion come at a time when many are exposed to one of the highest transactional charges in the region which have prompted the central bank to force all commercial banks to introduce basic bank accounts that do not charge service fees upon opening an account.
Likukela, in response to the latest Namibian Financial Stabililty report, argued that although the financial system is healthy, sound and well-capitalized, many Namibians still continue to sink deeper into economic hardships.
“These developments could suggest that despite the financial institutions having experienced remarkable growth in assets and profitability, this growth has not translated tangibly into an improvement in the economic welfare of many Namibians as the majority remains deep in debt, tattered balance sheets and weak buying power” Likukela said.
“While it is fundamentally important for the financial system to be sound and stable because of its role in supporting sustainable economic growth, it’s equally important to ensure that the benefits thereof trickled down to the real economy and improve the livelihood of these households, particularly, households who depend on debt. Heavy household debts are known to amplify slumps and weaken economic recoveries,” he said.
“GDP growth slumped to 0.2% in 2016, from 6.1% in 2015, and is expected to recover gradually to 2.9% in 2017. However, this recovery will be challenged by the huge debts held by both corporates and households despite the clean bill of health of the financial sector.
According to the Financial Stability report, the ratio of household indebtedness to disposable income remained high at the end of December 2016 despite a slight moderation. “While the banking assets grew by 10.1% to stand at N$110 billion, household debts also increased to N$50.1 billion, which represents an annual growth in the indebtedness ratio of 9.3% during the period under review” said Likukela.