Majority of Namibians Deep in Debt

Many Namibians still struggle with debt despite a recent report by the Namibian Financial Supervisory Association and the Bank of Namibia giving that country’s financial sector a clean bill of Health a renowned Namibian Market analyst and Managing Director of Twilight Capital Mally Likukela said.

His sentiments come at a time when many Namibians 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 anything upon opening an account, AllAfrica reported.

Likukela, in response to the latest Namibian financial sector report, argued that the financial system is healthy, sound and well-capitalized, but many Namibians 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, shattered balance sheets and weak buying power.

“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 also 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.

Likukela also acknowledged that improvements in the performance of the Namibian financial sector also come at a time when the country’s gross domestic product has been improving.

“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.

“Stability, soundness and profitability of the financial system should be evaluated against social, economic value and benefits to the household (borrowers) and any mismatch can give rise to the suspicions of possible exploitations.

“According to the Namibia 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 ($8.36 billion), household debts also increased to N$50.1 billion, which represents an annual growth in indebtedness ratio of 9.3% during the period under review.”

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Many Namibians continue to sink deeper into economic hardships.