07 August 2018 | Bankwese

Households, businesses wary of credit

Growth in overdrafts slowest in years

“The sluggish growth observed in overdraft credit during the month stemmed mainly from corporate repayments and a lower uptake from the household sector.” - Bank of Namibia

NDAMA NAKASHOLE

The latest money and banking statistics from the Bank of Namibia (BoN) show that growth in overdraft credit decreased by 2.9 percentage points to register 0.6% at the end of June.

This is the lowest annual growth in overdrafts in over two years, the central bank’s statisticsa trends show.

BoN’s trends further show that annual growth in overdrafts has been lower in 2018 compared to 2017, when growth in overdrafts went up to as high at 16%.

While June 2017 showed higher rates of annual growth in overdrafts compared to many other months during the past two years, June 2018 was the only month to register annual growth in overdrafts of less than 2%.

“The sluggish growth observed in overdraft credit during the month stemmed mainly from corporate repayments and a lower uptake from the household sector,” BoN says.

Decreasing appetite

Overdrafts by businesses at the end of June 2017 stood at N$8.799 billion. One year on, it only went up by N$51.5 million to register N$8.850 billion at the end of June 2018.

While this represents a 0.6% annual growth in total overdraft credit, there was negative growth in total overdrafts during the month under review.

Overdrafts totalled N$128.1 million less at the end of June compared to the N$8.978 billion recorded in May 2018.

Month-on-month, this represents a negative growth of 1.4% in June.

Annually, there is a significant difference in the total growth in overdraft credit between June’s 0.6% compared to May’s 4.1% and April’s 3.3%.

Individuals

Annual growth in overdrafts taken by individuals was recorded at N$3.138 billion at the end of June, recording a 0.6% annual growth from the N$3.120 billion recorded at the end of June 2017. While this shows an N$18.4 million growth in individuals’ overdrafts, there was N$35.9 million less in overdrafts at the end of June compared to the N$3.174 billion recorded in May 2018.

Other loans

Other loans and advances (such as personal/commercial loans and credit cards) also edged lower at the end of June 2018. The annual growth in other loans and advances moderated to 14.4% at the end of the period under review, from 14.8% at the end of May 2018. The moderate growth was mainly driven by a lower uptake by the household sector during June 2018.

Instalment sales continued to contract, albeit at a moderate pace, at the end of June 2018. On a 12-month basis instalment sales contracted moderately to 5.6% at the end of June 2018, from a contraction of 5.5% a month earlier. The amendments to the Credit Act and the slower than usual economic growth have had a significant impact on vehicle sales.

The annual growth in mortgage credit extended to the private sector rose slightly at the end of June 2018. On an annual basis growth in mortgage credit edged up to 7.6% at the end of June 2018 from 7.5% at the end of May 2018. The uptick was mostly reflected in mortgage extended to the corporate sector, which rose by 3.2 percentage points month-on-month to 8.8% as a result of an increase in commercial property lending at the end of the review period.

Overall

Growth in total credit extended to businesses rose during the period under review. The annual growth in credit extended to businesses stood at 4.2% at the end of June 2018, higher than 2.9% at the end of May 2018. The improved growth was mainly reflected in mortgage loans extended for commercial purposes, which rose by 3.2 percentage points to 8.8% at the end of June 2018.

Credit extended to the household sector rose moderately at the end of June 2018. Total credit extended to the household sector rose slightly to 6.4% during June 2018, from a growth of 6.3% recorded at the end of May 2018. The meagre growth in credit extended to the household sector was mainly reflected in the increased leasing contracts undertaken by the household sector during the month under review.