Development Bank against defaulters
The Development Bank of Namibia (DBN) has set up a special unit to help contain increasing non-performing loans.
Quarterly results released by the bank on Tuesday showed that its loan book stood at N$1.364 billion at the end of March 2013 against a target of N$1.440 billion while the impairment ratio showed a 2.2% increase from the previous quarter to 7.6%.
The increase in impairments means the bank is now above the 7% benchmark of the Association of African Development Finance Institutions (AADFI). Last year, the bank estimated the impairment ratio to peak at around 6% before stabilising this year.
DBN said that the Workout and Recoveries Unit was set up as a result of the growth in the bank’s loan book and to assist customers in distress with financial advice on how to overcome their cash flow challenges. This responsibility was previously with the Lending Department.
The bank is hopeful that the setting up of the new unit, responsible for monitoring all the loan arrears on a daily basis from day one when an account falls into arrears, will free up lending personnel to concentrate on the growth of the loan book.
The bank’s Acting CEO, Martin Inkumbi believes it is too early to sound alarm bells yet despite the increase in the number of non-performing loans since the first quarter of 2012 when the impairment ratio stood at 4.3%. He argues that measures put in place last year to contain rising impairments have not failed.
Inkumbi said: “The impairment ratio has exceeded our target as at end of March 2013, but we remain positive that we can reduce it during the course of the year.
“The measures have not failed. Improving the quality of the loan book is a process that takes time. It is not an overnight solution.”
Inkumbi added that when a loan is impaired (i.e. written off as an expense, it does not mean that there will be no recovery of at least part of that loan amount.) “And when a recovery is made, it is written back as income,” he said.
The Development Bank said it has financed a number of SMEs that experience financial difficulties for a number of reasons, but mostly due to the fact that SMEs do not have access to expert financial advice to help them turn around their businesses, hence the need for the Workout and Recoveries unit to provide financial advice.