N$9.7 billion in credit extended year to date
Data amassed by stock broking firm IJG Securities indicates that the total credit extended for 2014 totals approximately N$9.7 billion. Releasing its monthly Private Sector Credit Extension report for August, IJG reported that credit extended to the private sector increased by N$944 million, or 1.48%, in August 2014, taking total credit outstanding to N$64 billion. On an annual basis Private Sector Credit Extension growth picked up by 0.8 percentage points, to 16.3%. As such, a net total of N$9.7 billion worth of credit has been extended over the last year. This is the highest level of net issuance seen over a 12 month period in the history of the country. Of the total, approximately N$4 billion was issued to businesses, while N$5.5 billion was issued to individuals. “Credit extension to households expanded by 1.2% on a monthly basis and 14.2% on an annual basis in August, a slightly slower rate of growth than was seen in the preceding month. 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,” Said IJG.
According to IJG, mortgage credit is still by far the biggest component of credit extended to households contributing N$2.8 billion of the N$4.9 billion increase seen for the year and N$300 million on a month on month basis.
“This is largely due to households taking advantage of the low borrowing costs currently in play. Instalment credit makes up the second largest component of credit extended to households [6.3%] and is also the second quickest growing component as stated above. 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,” said IJG. Credit extension to corporates grew by 19.7% year-on-year in August, up from 17.2% in July. On a monthly basis all the sub-categories grew except for other loans and advances which fell slightly. Leasing transactions grew by the biggest percentage [7%] but represents only 0.9% of the credit extended to corporations. Overdrafts grew by 3.4% for the month after declining in the previous month. Mortgage loans, the largest component of credit extended to corporations, grew by 2.4% for the month. Overall for the month credit extended to corporations rose 1.9%, the IJG report concluded.