Billions flow for debt holidays

Billions flow for debt holidaysInterest rates drop again Commercial banks in Namibia granted debt relief totalling N$9.2 billion to consumers and businesses in the three months to the end of June. Banks are trying to keep in their homes and in their cars. They are not trying to repossess unnecessarily. – Johannes !Gawaxab, Governor: BoN Jo-Maré Duddy



More than 9 000 individuals and businesses in the top five sectors hit worst by Covid-19 have received debt relief from local commercial banks in the past quarter.

These sectors are households, real estate and business services, as well as trade, tourism and hospitality ventures, transport and construction.

In total, commercial banks granted debt holidays worth N$9.2 billion to sectors impacted by the pandemic, not just those mentioned above.

About 57% of all debt relief applications received by banks during the three months were approved, the governor of the Bank of Namibia (BoN), Johannes !Gawaxab, said yesterday. The combined loan book of commercial banks at the end of June was N$100 billion.

!Gawaxab was speaking at the BoN's monetary policy announcement where the central bank lowered its repo by 25 basis points from 4% to 3.75%.

Sectors

Households and individuals received the bulk of debt relief, he said. A total of 6 500 individuals were granted debt holidays of N$3.9 billion in total.

“Banks are trying to keep people in their homes and in their cars. They are not trying to repossess unnecessarily,” !Gawaxab said.

A total of 839 trade, tourism and hospitality businesses received debt relief totalling N$2.2 billion from banks. The 1 263 real estate and business services companies who successfully applied, were assisted with N$1.6 billion in total.

From the construction sector 317 applications to the tune of N$332 million in total were granted. A total of 370 transport businesses were also successful and received debt holidays of N$222 million in total.

The remaining N$946 million in debt relief granted by banks were distributed to, among others, the agriculture, electricity, gas and water, as well as the financial and insurance sectors.

!Gawaxab said unsuccessful applications were those who couldn't prove that they were affected adversely by the Covid impact or they weren't in good standing at banks. Others were refused because banks were “simply pricing for risk”.

However, the BoN is watching the data closely and is ready to act appropriately to uphold its mandate, !Gawaxab said.

“We are facing an abnormal situation and the sad reality is that not all businesses will survive. Some will unfortunately do bankrupt,” he said.



Cheaper debt

!Gawaxab said the central bank remains committed to do everything in its mandate to stimulate the economy.

The BoN has lowered its repo by 275 basis points since February, bringing interest rates to historic lows.

The repo has dropped from 6.5% at the beginning of 2020. The prime lending rate of commercial banks in the beginning of the year was 10.25%. With yesterday's repo cut, it will decrease to 7.5%.

!Gawaxab yesterday said there was still room for further interest rates cuts.