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1PageFinancial Stability Report - March 2014
Financial Stability ReportMarch 2014
2PageFinancial Stability Report - March 2014
Bank of NamibiaFinancial Stability ReportMarch 2014Volume 8No 1
Registered Office71 Robert Mugabe AvenueP.O. Box 2882WindhoekNamibia
IPageFinancial Stability Report - March 2014
Bank of Namibia
• DeputyGovernor(Chairperson)• TechnicalAdvisortotheGovernor• ResearchAdvisortotheGovernor• DirectorofResearchandDeputyDirectors• DirectorofBankingSupervisionandDeputyDirectors• DirectorofFinanceandAdministration• DirectorofFinancialMarketsandDeputyDirectors• DirectorofPaymentandSettlementSystemsandDeputyDirectors• DirectorofStrategicCommunications&FinancialSectorDevelopment• ChiefRiskOfficer
Namibia Financial Institutions Supervisory Authority
• GeneralManagerforProvidentInstitutions• GeneralManagerforInvestmentInstitutions• GeneralManagerforInsuranceDivision• GeneralManagerforResearchPolicyandStatistics
© Bank of Namibia
All rights reserved. No part of this publication may be reproduced, copied or transmitted in any form or by any means, including photocopying, plagiarising, recording and storing without the written permission of the copyright holder except in accordance with the copyright legislation in force in theRepublicofNamibia.Thecontentsof thispublicationare intendedforgeneral informationonlyand are not intended to serve as financial or other advice. While every precaution is taken to ensure the accuracy of information, the Bank of Namibia shall not be liable to any person for inaccurate information or opinions contained in this publication.
Published by the Bank of Namibia71 Robert Mugabe AvenueWindhoekNAMIBIATel.:+264612835111http://www.bon.com.na
Financial System Stability Committee
IIPageFinancial Stability Report - March 2014
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IIIPageFinancial Stability Report - March 2014
BoN Bank of Namibia
CMA CommonMonetaryArea
ECB EuropeanCentralBank
EMEs EmergingMarketEconomies
FNB FirstNationalBank
FSR FinancialStabilityReport
HHI Herfindahl-HirschmanIndex
IMF InternationalMonetaryFund
JSE JohannesburgStockExchange
LHS Left-handSide
NAD Namibia Dollar
NAMFISANamibiaFinancialInstitutionsSupervisory
Authority
NBFI Non-bankFinancialInstitution
NISS NamibiaInter-bankSettlementSystem
NPL Non-performing loan
NSX NamibianStockExchange
PSCE PrivateSectorCreditExtension
RHS Right-handSide
ROA ReturnonAssets
ROE ReturnonEquity
RWCR Risk-WeightedCapitalRatio
SACU SouthernAfricanCustomsUnion
SARB SouthAfricanReserveBank
WEO WorldEconomicOutlook
VIX VolatilityIndex
List of Abbreviations
IVPageFinancial Stability Report - March 2014
ThepurposeoftheFinancialStabilityReport(FSR)istoidentifyrisksandvulnerabilitiesinthefinancial
systemandassesstheresilienceofthefinancialsystemtodomesticandexternalshocks.Thereport
alsoservesasacommunication tool.Thereportpresents recommendations to the identifiedrisks.
Lastly, the report is published to inform the reader on the soundness of the financial system, and what
the regulators and government are doing in order to mitigate risks to the Namibian financial system.
Financial system stability is defined as the resilience of the domestic financial system to internal and
external shocks, be they economic, financial, political or otherwise. It can also be described as the
absence of macroeconomic costs of disturbances in the system of financial exchanges between
households, corporates, and financial institutions.
ThefinancialsysteminNamibiaconsistsoffinancialmarkets,instruments,institutionsandinfrastructure.
Theregulatorystructure,whilenotstrictlyapartof thefinancialsystem,playsan important role in
regulatingandmonitoringthesystem.UnderthemandateofSection3(a)oftheBankofNamibiaAct,
1997(No15of1997,asamended)theBankofNamibiahasanobjective“topromoteandmaintain
a sound monetary, credit and financial system in Namibia and sustain the liquidity, solvency and
functioningofthatsystem”.ThemandateofNAMFISA,withregardstofinancialstability,encompasses
the supervision of the business of financial institutions and financial services and providing advice to
theMinisterofFinanceonmattersrelatedtofinancial institutionsandservices.Thestabilityof the
financial system is critical as the system provides important services to households, corporates and
the real economy.
ThisreportisjointlyproducedbytheBankofNamibiaandtheNationalFinancialInstitutionSupervisory
Authority(NAMFISA).Thetwoinstitutions,whichareentrustedwiththeregulationofthefinancialsystem
inNamibia,workcloselytoensureahealthyfinancialsystem.Thereisalsoactiveengagementbetween
the Bank of Namibia, NAMFISA and the Ministry of Finance to ensure a comprehensive assessment of
systematic financial risks and of policy actions to ensure lasting financial system stability.
Preface
VPageFinancial Stability Report - March 2014
Content
The Bank of Namibia’s Corporate Charter ii
NAMFISA’s Corporate Charter ii
List of Abbreviations iii
Preface iv
I. Introduction 1
II. Summary of Risk Analysis 2
A.RisksStemmingfromtheExternalMacroeconomicEnvironment 4
B.RisksStemmingfromDomesticHouseholdsandCorporateDebt 4
C.RisksStemmingfromthePerformanceoftheBankingSector 5
D.RisksStemmingfromthePerformanceoftheNon-BankingFinancialSector(NBFIs) 5
E.RisksStemmingfromthePaymentandSettlementsSystem 6
III. Macroeconomic Environment 7
GlobalEconomicGrowth 7
GlobalFinancialMarkets 8
OutputandInflation 11
IV. Domestic Households and Corporate Debt Indicators 12
V. Performance of the Banking Sector 20
VI. Performance of the Non-Banking Financial Sector 29
VII.Payments Infrastructure and Regulatory Developments 34
VIII. Concluding Remarks and Policy Actions 37
APPENDICES 39
Appendix1:FinancialSoundnessIndicators 39
Appendix2:Methodology 40
Appendix3:Methodology–CorporateDebt 42
Appendix4:Estimationchallenges 43
Appendix5:Performanceofthenow-BankingSector 46
1PageFinancial Stability Report - March 2014
I. Introduction
1. Since the last issuance of the FSR in September 2013, the risks stemming from the external
macroeconomic environment have remained largely unchanged and may diminish going forward
on account of enhanced financial stability in emerging markets and sustained economic recovery
from advanced economies. The initial pessimistic scenario for emerging markets expected upon
announcementoftheUSFed’staperingofitsQuantitativeEasing(QE)appearstohaveabatedsofar,with
somewhatregainedstabilityofleadingemergingmarkets’currenciesandforeigncapitalflows.Advanced
economies,particularlytheUS,continuetorecover.
2. Despiteexchangeratevolatilityandseveredrought,thedomesticeconomyregisteredsatisfactory
performanceandlowinflationduringthesecondhalfof2013. Domestic engines of growth, including
sizeableconstructionactivityintheminingsector(uraniumandgold),sustainedabriskgrowthofthelocal
economy.Also,relativelyrapidgrowthofthetertiarysector,particularlywholesaleandretailtradesuggests
astronggrowthofprivateconsumption,albeitputtingpressureonthecentralbank’sinternationalreserve
position.Monthlyinflationrateshaveremainedrelativelylowwithanannualinflationrateof5.6percentfor
2013,downfrom6.7percentin2012.
3. Householddebtasashareofdisposableincomeincreasedfrom83percentinend-June2013to
87percentbyend-December2013, thuswarrantingstrongmonitoring. The rise in the household
indebtednessratioislargelyattributedtoafasterincreaseinbankcredittohouseholdsrelativetothegrowth
inhouseholds’disposableincome.AswashighlightedinpreviousFSRs,householddebtispredominantly
mortgageloans,contractedatvariableinterestrate.Assuch,goingforward,anyincreasesininterestrate
levelsmayplaceanadditionaldebtburden,whichisalreadyhighbyinternationalcomparisons.
4. Corporatedebtlevels(asashareofGDP)arehigherthanyearsback(albeitdecliningmarginally
between end-June and end-December 2013), but are, in principle, supporting valuable future
export promotion activities.Assuch,risksofcorporatedebtremain lowandunchangedfromearlier
FSRassessments,butwarrantmonitoringgoingforward,asnewcorporatedebtanddebtservicecosts
increase. Large exposures to manufacturing, as well as to transport and logistics, also warrant oversight
due to concentration risks.
5. Financialsoundnessindicatorsforthebankingsectorremainatcomfortablelevelsbyinternational
standards, although some structural patterns of the balance sheets require monitoring. The
resilienceofthecommercialbanksisregularlytestedandcurrentstresstestingresultssuggeststhatthe
commercialbankinginstitutionsareabletowithstandashocktothebankingsystem.Ofconcernisthe
assetsofbankinginstitutions,whicharehighlyconcentratedinmortgageloans,andassuch,thesituation
needs continuous monitoring in light of the high level of household indebtedness. The inherent risk of
bankinginstitutionmaturitymismatchremainunchangedforthenextsixmonth(i.e.thesameasobserved
inFSRinSeptember2013).Notwithstandingtheaboveconcerns,thebankingsectorremainscompliant
withregulatoryliquidityrequirements.
6. Since the last FSR report of September 2013, the balance sheets of non-banking financial
institutions remain healthy. This is expected to continue in the next sixmonths. NBFIs continue to
registerdouble-digitassetgrowthduringtheyear2013.Providentinstitutionsremainedwellcapitalised,
withsolvencylevelsexceedingthestatutoryrequirements.Investmentinstitutionsinvestedmostoftheir
assetslocally,inlinewithregulatoryrequirementsaswellastheriskappetiteoftheirclients.
7. Since the previous Financial Stability Report in September 2013, the payment infrastructures
continuetooperateeffectivelyandefficientlywithnomajoroutages.Someoperationalcontrolsare
beingreviewedinordertofurtherstrengthenefficiencies.
2PageFinancial Stability Report - March 2014
II. Summary of Risk Analysis
Thissectionpresentsananalysisofthemainriskstothestabilityofthedomesticfinancialsystem.
Consistent with sections III-VII of this Report, the analysis identifies risks arising from: (i) the external
macroeconomicenvironment,(ii)developmentsinhouseholdandcorporatedebt,(iii)domesticbankingand
non-bankinginstitutions,and(iv)thepaymentandsettlementsystem.Therisksareanalysedandratedfrom
lowrisktohighriskbasedontheirprobabilityofoccurringandthepotential impactonfinancialstability in
Namibia, should the risk develop and be realised.
ThemainriskstodomesticfinancialstabilitylargelyremainunchangedasidentifiedintheSeptember
2013editionoftheFSR.Thespider-chart(Figure1)andcomparisontable(Table1)showtheevolvingrisks
facingthedomesticfinancialsystembetweentheSeptember2013andtheMarch2014editions,andhighlight
theprobabilityandpotentialimpactofspecificrisks.
Figure 1: Domestic Financial Stability Risk Map
3PageFinancial Stability Report - March 2014
Table 1: Risks to Financial Stability for the upcoming six months1
Risk Change from Sep2013 Assesment
Probability Impact Probability Impact
Macroeconomic Environment risks Medium Medium Down Unchanged
Global economic slowdown Down Unchanged
NAD/ZARdepreciation Unchanged Unchanged
Exportdemandfalls Down Unchanged
InternationalReservesfall Unchanged Unchanged
Household Debt risks Medium Medium Up Up
Household debt increases Up Up
Corporates Debt risks Low Low Unchanged Unchanged
Corporates debt increases Unchanged Unchanged
Banking Sector risks Low Low Unchanged Unchanged
Bankinginstitutionmaturitymismatch Unchanged Unchanged
Payment System risks Low Medium Down Down
Securityofretailpayments Down Unchanged
Settlementinlastwindow Unchanged Unchanged
NBFI risks Low Medium Unchanged Unchanged
Contagionamongstfinancialinstitutions Unchanged Unchanged
Assetexposuretocapitalmarket Unchanged Unchanged
NSXassetpriceinflation Unchanged Unchanged
Risk analysis key High Medium Low
1The ‘Risk’ column presents the risks to financial stability as assessed going forward six months (i.e. the period Jan – Jun 2014) and the ‘Change’ column presents the change from the risk assessment, as it was presented in the previous FSR, in this case the September 2013 FSR.
4PageFinancial Stability Report - March 2014
A. Risks Stemming from the External Macroeconomic Environment
Therisksstemmingfromtheexternalmacroeconomicenvironmentarelikelytoremaincontainedand
may diminish during the next six months on account of enhanced financial stability in emerging markets
and sustained economic recovery in advanced economies. The initial pessimistic scenario for emerging
markets expected upon announcement of theUSFed’s tapering of itsQuantitative Easing (QE) program,
appears to have abated so far,with somewhat regained stability of leading emergingmarkets’ currencies
andforeigncapitalflows.Goingforward,theexternalenvironmentmaybebroadlystableastheUSclarified
its expected exit fromQE, largely guided by accommodativemonetary stance and a broad approach to
macroeconomicassessmentsonthefinancialhealthoftheAmericaneconomy.
ThedepreciationofthenominalRand/US$dollarexchangerateexperiencedduringthelastquarterof
2013appearstobecontained.Onaverage,theRandtradedatR9.2againsttheUSDduringthefirsthalfof
2013,anddepreciatedfurthertoR10.18duringthesecondhalfof2013.However,therandhasappreciatedin
nominaltermsintherecentpastfollowinga50basispointincreaseintheSARB’sreporateinJanuary,aswell
asdiminisheduncertaintyabouttheQEexitstrategyoftheUSFederalreserve.ByearlyApril2014,theRand
tradedataroundR10.6perUSdollar,downfromR10.9perUSdollarinlateJanuary/earlyFebruary2014.
Despiteexchangeratevolatilityandseveredroughtthedomesticeconomydisplayedasatisfactory
performanceduring the secondhalf of 2013, largely on account of adynamic construction sector
and limited pass through from the exchange rate depreciation to domestic inflation. Domestic engines
ofgrowth,includingsizeableconstructionactivityintheminingsector,sustainedabriskgrowthofthelocal
economy.Also,relativelyrapidgrowthofthetertiarysector,particularlywholesaleandretail tradesuggests
astronggrowthofprivateconsumption,albeitputtingpressureon thecentralbank’s international reserve
position.Monthly inflationrateshaveremainedrelatively low,withanannual inflationrateof5.6percentfor
2013,downfrom6.7percentin2012.Goingforward,theNamibianeconomyisprojectedtoexpandfurther
to5.3percentin2014,whileinflationisexpectedtoremainlow,beforeacceleratingmildlylaterintheyear.
In sum, in terms of the overall macroeconomic risks assessment, the risks remain unchanged since
the latest FSR,whiletheexternalenvironmentissomewhatmorebenignthanearlyassessedonaccountof
diminisheduncertaintiesaboutanabruptQE’sexitpolicyimplementation.
B. Risks Stemming from Domestic Households and Corporate Debt
HouseholdSector
Household debt as a share of disposable income increased from 83 percent at end-June 2013 to
87 percent by end-December 2013, thus warranting strong monitoring. The rise in the household
indebtednessratioislargelyattributedtoafasterincreaseinbankcredittohouseholdsrelativetothegrowth
inhouseholds’disposable income.During thesecondhalfof2013,credit tohouseholds increasedby8.2
percenttoN$36.6billion,whiledisposableincomeroseby4.3percenttoN$46.8billion.Onayearlybasis,the
credittohouseholdsincreasedby15.0percent,whilethegrowthindisposableincomesurgedby8.9percent.
5PageFinancial Stability Report - March 2014
AswashighlightedinpreviousFSRs,householddebtispredominantlymortgageloans,contractedatvariable
interestrate.Assuch,goingforward,anyincreasesininterestratelevelsmayplaceanadditionalburdenin
debt service costs.
CorporateSector
Corporatedebtlevels(asashareofGDP)arehigherthanyearsback(albeitdecliningmarginallybetween
end-Juneandend-December2013),butare,inprinciple,supportingvaluablefutureexportpromotion
activities.Assuch,risksofcorporatedebtremain lowandunchangedfromearlierFSRassessments,but
warrant monitoring, going forward, as new corporate debt and debt service costs increase. Large exposures
to manufacturing, as well as to transport and logistics, also warrant oversight due to concentration risks.
C. Risks Stemming from the Performance of the Banking Sector
Thereviewofthebankingsectorandstresstestingthebooksofthecommercialbankinginstitutions
reveal that the industry remains adequately capitalised, however some structural patterns of the
balance sheets require monitoring. The results of the stress testing exercise suggest that the commercial
bankinginstitutionsareabletowithstandashocktothebankingsystem2.It isalsoworthnothingthatnon
performing loansonmortgagescredit remainatvery loaw levels.Despite the testing results,monitoring is
warranted,especiallyonthehighexposureofthecommercialbankinginstitutionstomortgageloans,which
continues to remain a concern.
Theinherentriskofbankinginstitutionmaturitymismatchremainsunchangedforthenextsixmonthi.e.
thesameasobservedinFSRinSeptember2013.Thematuritymismatchisevidentinthehighproportion
ofcreditextendedtothemortgagesectorandthefactthat,ontheliabilityside,demanddepositsconstitute
themajorityofdeposits.Otherwise,thebankingsectorremainscompliantwithregulatoryliquidityandforeign
exchangeexposurerequirements.
D. Risks Stemming from the Performance of the Non-Banking Financial Sector (NBFIs)
The NBFIs predominantly manage assets to support liabilities in respect of beneficiaries and/or
policyholders. Specifically,pensionfundsandlong-terminsurersmanageassetsofaboutN$142billionto
supportliabilitiesofapproximatelyN$137billion.Theassetsoftheseinstitutionsareinvestedthroughunittrust
schemes and investment managers, although this is more prevalent for pension funds than long-term insurers.
These institutions invest their assets over a medium to long-term period and as such assume investment risk
as a result of prolonged exposure to the domestic, regional and global capital markets.
Aslumpinthedomesticcapitalmarketorwithinthecommonmonetaryarea(CMA)couldposearisk
to the assets of key NBFIs.Thiscouldforinstancebecausedbyweakeconomicperformanceintherest
ofAfricaandtheworldatlarge.Itshouldbenoted,nonetheless,thatanincreasingportionofearningoflisted
2 See the highlights on stress testing results under section V (i.e. Performance of the Banking Sector).
6PageFinancial Stability Report - March 2014
equityontheJSEarerelatedtoforeignactivities(miningcompanies,telecommunication,etc.),thereforeless
exposedtoeventsinSouthAfricaspecificallyonly.However,theassetsofanumberofkeyNBFIs,particularly
longterminsuranceandpensionfunds,couldpotentiallycomeunderduress.
E. Risks Stemming from the Payment and Settlements System
TherisksemanatingfromthepaymentandsettlementsystemremainasreportedintheSeptember
2013FSR.AnumberofdisruptionstoNISSwererecordedoverthesecondhalfof2013,butdidnotposeany
majorthreattofinancialstability.Conversely,twodisasterrecoverytestsweresuccessfullyconductedduring
thesecondhalfof2013,whichincreasestheavailabilityofNISS.Theinadequaciesintheoperationalcontrol
environment,asidentifiedintheSeptemberFSR,remain.Additionally,atrendtowardsmorepaymentsbeing
processedinthelastsettlementwindowintheNISS(i.e.Window3,15H00-16H40)wasobservedduringthe
lasthalfof2013.ThisiscountertotheidealofsettlementsoccurringinWindow1(i.e.08H00-12H00).The
reasonsforthisaretemporaryanditisexpectedthateffortswillbemadetoreversethetrendinthenextsix
months.Besides,therehavebeenalotofimprovementsintheregulatorysphere,whichhashelpedanchor
theriskprofileofthepaymentandsettlementsystem.Whencalculatedasaproportionofthetotalamount
transactedbyNamibians using cheques andpayment cards (i.e. debit, cheque/hybrid, credit, etc.), fraud
tosales lossesdeclined to0.01percentduring thesecondhalfof2013,witha turnoverofN$18.4billion
(comparedto0.03percentinthefirsthalfof2013whentheturnoverwasN$16.8billion).
7PageFinancial Stability Report - March 2014
III. Macroeconomic Environment
SincethelastFSRreportofSeptember2013,globalactivitystrengthened,withrecentdatapointing
at further improvements. Advancedeconomies,mainlytheUS,UKandJapan,havebeenrecoveringsince
mid-2013,thuscomplementingsustainedrelativestronggrowthintherestoftheworld.Followingaperiod
of heightened turbulence in foreign exchange markets in leading emerging market economies (including
SouthAfrica),exchangeratevolatilityandcapitaloutflowsappeartohavesubduedintherecentpast,with
outputinthoseeconomiescontinuingtogrowatarelativelystrongpace.TheNamibianeconomyhasbeen
somewhatshelteredfromthereportedvolatilityinglobaltradeandfinance.Factorsexplainingthedomestic
economy’sresilienceincludeindigenoussourcesofgrowth(i.e.sizeableconstructionintheminingsector)and
alimitedpassthroughfromexchangeratedepreciationontoinflation.Goingforward,risksstemmingfromthe
macroeconomic environment appear to be somewhat contained and diminishing.
Global Economic Growth
Global activity strengthened during the second half of 2013, with recent data pointing at further
marginal improvements in advanced economies.Theaccelerationofeconomicactivityinthesecondhalf
of2013was largelysupportedbyareboundof theAmericaneconomyaswellas improvedgrowth in the
Eurozone.DespiteamarginalmoderationinrealGDPgrowthinemergingmarkets,growthcontinuedtobe
relativelyhigh,comparedtoadvancedeconomies.Goingforward,globalgrowth isprojectedto improveto
3.6percentin2014,from3.0percentin2013,andtorisefurtherto3.9percentin2015largelyonaccountof
therecoveryinadvancedeconomies(IMFWorldEconomicOutlook,April2014)(Figure2).Initially,the2013
outputforecastswerenotoptimistic,astheywereovershadowedbytheFed’sannouncementtoscaledown
itsquantitative-easing(QE)program,whichheightenedvolatilityintheglobalfinancialmarkets,particularlyin
the main emerging market economies. These macroeconomic risks, however, have diminished in the recent
past,astheUSprovidedmorecomfortaboutaslowerphasingoutofitsQEtaperingapproachthaninitially
assumedbymarkets.
Asnoted,theUShasbeenanengineofgrowthsincethesecondhalfof2013,whilegrowthprospects
in other advanced economies also improved.TheUSeconomicperformanceimprovedthroughout2013,
withannualgrowthstandingat2.6percentinthefourthquarter,comparedwith4.1percentgrowthinthethird
quarter.Fortheyearasawhole,theeconomygrewby1.9percentin2013anditisexpectedtogrowby2.8
percentin2014and3.0percentin2015.Similarly,theUKeconomygrewby2.7percentinthefourthquarter,
whilerealGDPgrowthincreasedby1.8percentin2013.Itisprojectedtogrowby2.9percentand2.5percent
in2014and2015,respectively.Likewise,realGDPgrowthforEuroAreaimprovedfurtherfrom-0.3percentin
thethirdquarterof2013to0.5percentinthefourthquarter,whichmarkedaturnaroundfollowingsixquarters
ofnegativeoutputgrowth.Onanannualbasis,theEuroAreashrankby0.5percentin2013,althoughit is
expectedtogrowby1.2percentand1.5percentin2014and2015,respectively.
Economic growth in emerging markets remained robust, notwithstanding earlier expectations for a
deceleration.Chinagrewby7.7percent in the fourthquarter, despite earlierworries about ahard
landing. RealGDPgrowthinIndiaeasedto4.7percentinthefourthquarterof2014,largelyduetotighter
credit conditions that had an adverse impact on investment. South Africa, however, showed a lacklustre
performancewithgrowthofabout2.0percentinthefourthquarterfrom1.7percentintheprecedingquarter,
8PageFinancial Stability Report - March 2014
drivenmainly by economic activities in themining and quarrying, construction,wholesale and retail trade
aswell as transport, storage and communication sectors. Therewas also a situation of sizeable financial
imbalancesin2013.TheIMFprojectsthatSouthAfrica’srealGDPgrowthwillincreaseto2.3percentin2014
from1.9percentin2013onthebackofslightrecoveryinconsumptionandinvestment.Itisprojectedtogrow
furtherto2.7percentin2015.RiskstotheSouthAfrica’seconomicgrowthareparticularlyexpectedfromthe
effectofthecontinuousstrikesintheminingindustryandtheelectricitysupplyconstraints.
Figure 2: Global Growth (2012-2015)
Source: IMF World Economic Outlook update, January 2014, *=projected
Global Financial Markets
Advanced Economies
Generally,during2013andintherecentmonths,globalequitymarketindicescontinuedtoimprove
in advanced economies, while financial volatility continued to decline. Thiswaslargelyattributedtothe
impactofbroadlyaccommodativemonetarypoliciesworldwideandimprovingglobaleconomicoutlook.The
optimisticsentimentmanifesteditselfinsubstantialgainsinequitymarkets,sizeableinflowsintoequityfunds,
and unabated tightening of credit spreads in advanced economies. Besides, risk premium on government
debtofcrisis-hitEuroareaeconomiesdeclinednoticeably.Inlinewiththesedevelopments,theVolatilityIndex
continuedtotrenddownwards,suggestingthatfinancialconditionseasedtowardtheendofthesecondhalf
of2013(Figure3).
9PageFinancial Stability Report - March 2014
Figure 3: Volatility Index
Source: Bloomberg
Goingforward,majorcentralbanksaroundtheworldareexpectedtosustainaforwardlookingstance
aimed at mitigating high volatility in financial markets. In this regard, theUSFederalReserveand the
Bank of England have emphasized that the monetary stance will remain accommodative despite faster-
than-expectedreduction inunemploymentrates.TheFederalReservealsoreassuredmarketsthata fall in
unemploymentpast6.5percentwouldnotnecessarilytriggeraninterestratehike.Consistentwiththisstance,
marketsappeartohavepushedbacktheexpecteddateinterestratehikesbyseveralmonths,suggestingthat
themacroeconomicriskposedbytheUSunwindingofitsQEhasbeensomewhatcontainedsofar.
Emerging Market Economies
CapitaloutflowsinemergingmarketeconomieshavebeenamainconcernsincetheFedannounced
thatitwillstarttaperingofitsQEprograminmid-2013.Althoughtheannouncementofthetaperinghad
beenexpected for long, it still resulted inportfolio shifts, capitaloutflowsandexchange rateadjustments,
particularlyinlargeemergingmarketswithsizeabledomesticandexternal imbalances.Thus,theexchange
ratedepreciationsintheemergingmarketstookafullswinginthethirdandfourthquarterof2013.InSouth
Africa,theseeffectstranslatedintheRand/USdollarexchangeratedepreciationfromanaverageofR9.21in
thefirsthalfof2013toanaverageofR10.1inthesecondhalfof2013(Figure4).
10PageFinancial Stability Report - March 2014
Figure 4: Currency movements of the Rand against the US Dollar
Source: Bloomberg
TheSouthAfricaReserveBank(SARB)increaseditsbenchmarkinterestrateto5.5percentfrom5.0percent
on29 January2014, in response to concerns regardingunderlying inflationary forces stemming from the
exchangedepreciationinlate-2013.ItwasthefirstinterestrateincreasesinceJune2008.Theprimaryconcern
wasthataweakerRandwouldfuel inflation,andconsequentlythreatentheBank’s3-to-6percent inflation
target.ItisworthnotingthataverageinflationinSouthAfricahasbeenhoveringjustbelowthe6.0percent
uppertargetceilingforlong(Table2).
Table 2: South Africa CPI index and annualized monthly inflation rate
2012 2013 (Index, Dec 2012 = 100)
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Index 126.1 126.4 126.7 100.3 101.3 102.5 102.9 102.6 102.9 104 104.3 104.8 105 105.1 105.4
Rate (%) 5.6 5.6 5.7 5.4 5.9 5.9 5.9 5.6 5.5 6.3 6.4 6.0 5.5 5.3 5.4
Source: Statistics South Africa
TheSouthAfricanequitymarket’s indexmarchedalongimprovementsinequity indicesaroundthe
worldduring2013andintheearlymonthsof2014(Figure5).
11PageFinancial Stability Report - March 2014
Figure 5: The JSE Africa All Share Index
Source: Bloomberg
DomesticEconomy
Output and Inflation
TheNamibianeconomyexperiencedarelativelystronggrowthandlowinflationduring2013,which
is expected to continue into 2014.Accordingtothepreliminarynationalaccounts,thedomesticeconomy
isestimated tohavegrownby4.4percent in2013and it isprojected toexpandby5.3percent in2014,
accordingtoBoN’sstaffprojections.Thegrowthin2013wasmainlydrivenbyinvestmentsandconstruction
activitiesintheminingsectorandpublicsectorinfrastructureprogrammes.Inflationforthesecondhalfof2013
remainedlowat5.3percentcomparedto6.3percentduringthefirsthalfof2013.Monthlyinflationrateshave
remainedrelativelylowwithanannualinflationrateof5.6percentfor2013,downfrom6.7percentin2012.This
isexplainedbytheslowdowninfoodandtransportinflation.Inflationisexpectedtoremaininthesingle-digits
fortheremainderof2014.
12PageFinancial Stability Report - March 2014
3
IV. Domestic Households and Corporate Debt Indicators
Household Indebtedness3
SincethelastissuanceoftheFinancialStabilityReportinSeptember2013,householdindebtedness
ratio increased further and remains relatively high by regional and international comparisons. This
increase in indebtedness ratios is largely due to a rapid rise in the bank credit extended to households,
whilehouseholds’disposableincomegrewatamoderatepace.Thehouseholddebtserviceratioroseonly
marginallyduringthelast6-7months.Theincreaseinthehouseholdindebtednessratiorepresentsariskto
thefinancialsector,whichwarrantstightmonitoringgoingforward.
Household Debt to Disposable Income
Thelevelofhouseholdindebtednessincreasedto87percentbyend-December2013,comparedto84
percentbyend-June,largelyonaccountofasubstantialriseinbankcreditextendedtothehousehold
sector (Table 4 and Figure 6). Credit extension rose at a brisk pace on account of a spike in instalment
credit(increasingatanannualrateof16.6percentbyDecember2013)andsustaineddoubledigitgrowthin
mortgagecredit(i.e.,increasingby13.3percentduringthesameperiod).
Table 4: Household Debt to Disposable Income
N$ millions 2009 2010 2011 2012 2013 2013
Dec Dec Dec Dec June Dec
Total (Disposable Income) (N$ mill) 29515 33130 36511 41991 44901 46811
Credit to Individuals/Households (N$ mill) 23256 24856 27917 31832 33858 36620
Household Debt to Disposable Income (%) 79 75 77 74 75 78
Adjusted Credit to Households (N$ mill) 25930 27714 31127 35492 37752 40831
Adjusted Credit to Disposable Income (%) 88 84 85 83 84 87
Ontheotherhand,disposableincomegrewatsingledigitsmainlyonaccountofimprovedtaxcollectionsby
theTaxRevenueauthority,whosetaxcollectioneffortsoutweighedtheimpactofareductioninhousehold/
individualincometaxatratesprovidedinthe2013/14fiscalbudget.
See Appendix 2 on the methodology
13PageFinancial Stability Report - March 2014
4
Figure 6: Household Debt and Disposable Income growth (by quarters)
Theratioofhouseholddebttodisposableincomeremainshighbyregionalandinternationalcomparisons
in an environment of historically low nominal interest rates(Figures7and8).HouseholddebtinNamibiais
predominatelyintheformofmortgagecredit,4 contracted at variable interest rates.
Figure 7: Selected Interest Rates 2008-2013
Over 50 percent of credit extension by the commercial banking institutions is towards mortgage loans.
14PageFinancial Stability Report - March 2014
5
Namibia’shouseholdindebtednessratiosremainaboveSouthAfrica’sandthegapbetweenthetwocountries
ratioswidenedduring2013 (Figure8).Namibia’shousehold indebtedness ratio isalsoconsideredhighby
international comparisons.
Figure 8: Household Debt to Disposable Income: Namibia and South Africa
The debt servicing ratio is a measure of the financial burden that the repayment of debt places on the average household, relative to its income. The measure is designed to illustrate the percentage of households’ incomes being spent on the servicing and repayment of debt. The ratio is calculated based on individuals’ gross income and total household debt, based on normal amortisation formulas using estimated outstanding loan duration, average lending rates and the outstanding balance on each class of loan.
Source: Bank of Namibia, South African Reserve Bank
Debt Servicing Ratio5
Thehouseholddebtserviceratiohasremainedvirtuallyunchangedsinceend-June2013,thetrend
that has been observed since 2009 (Table5andFigure9).Theratiostoodat20.1percentattheendof
December2013,representingamarginalincreaseof0.9percent,comparedtoend-June2013,accordingto
BoN’sstaffestimates.Thegeneralconstantdebtserviceratiolargelyreflectssustainedgrossanddisposable
income growth, attributable to sliding individual income tax, increase in compensation to employees and
accommodativemonetarypolicystancesince2009.
15PageFinancial Stability Report - March 2014
Table 5: Debt Servicing Ratios
Gross Income Growth (YoY)
Disposable Income Growth (YoY)
Annual Debt
Servicing Growth (YoY)
Debt Servicing to Gross Income
Debt Servicing
to Disposable
Income
Adjusted Debt
Servicing to Gross Income
Avg. Prime Rate
Dec 06 11 11 26 18 20 27 12
Dec 07 15 16 14 18 20 26 14
Dec 08 15 15 9 17 19 25 15
Dec 09 9 9 -6 15 16 21 12
Dec 10 13 12 0 13 15 19 11
Dec 11 10 10 14 13 15 20 10
Dec 12 15 15 13 13 15 19 10
Jun 13 6 4 6 13 15 19 9
Dec 13 12 9 17 14 15 20 9
Figure 9: Debt Servicing Costs
16PageFinancial Stability Report - March 2014
6
Corporate Debt
Afterincreasingrapidlyduringthefirsthalfof2013,totalcorporatedebtstockdecreasedfromN$54.8
billionbyend-June2013toN$53.7billionbyend-December2013. The decline in total corporate debt
reflectstrendswithforeignprivatecorporatedebt.Thereductioninforeigndebtconcealssizeableforeigndebt
reductionsonaccountofdebtconversionintoequity(swap)byaprominentminingcompanythatwasoffset
bynewcorporate indebtednesstoforeigncreditors. Corporatedebt levels (asashareofGDP)arehigher
thanyearsback,butare, inprinciple,supportingvaluablefutureexportpromotionactivities.Assuch,risks
ofcorporatedebtremain lowandunchangedfromearlierFSRassessments,butwarrantmonitoringgoing
forward, as new corporate debt and debt service costs increase. Large exposures to manufacturing, as well
as to transport and logistics, also warrant oversight due to concentration risks.
Totalcorporatedebt,which increasedsteadily (innominalterms)starting2009,declinedmarginally
betweenend-Juneandend-December2013(Table6).Thedeclineinthedebtstockreflectedacontraction
in foreigndebt,albeitconcealing importantfinancialoperationsbycorporates.The latter includedmainlya
N$11billiondebt-equityswapbyaminingcompanyduringthethirdquarter,whichcoincidedwithnewforeign
borrowingbyothercorporations.Thesewereagainpredominantlyexport-ledminingcompanies.
Table 6: Domestic and External Corporate Debt (Private Sector and SOEs)
2009 2010 2011 2012 2013 2013
Dec Dec Dec Dec June Dec
Domestic (%) 52.1 47.2 39.0 44.9 40.6 43.6
Foreign (%) 47.9 52.8 61.0 55.1 59.4 56.3
Total Debt (million) 26230 32472 41867 45922 54854 53655
YoY Change in % (Total) 2.1 23.8 28.9 9.7 23.0 -2.2
GDP (Nominal, N$ mill) 75070 81016 91658 107323 114042 120760
Debt to GDP Ratio (%) 34.9 40.1 45.8 42.8 48.1 44.4
Thecompositionofcorporate’stotalindebtednesschangedsincetheissuanceoftheFSRinSeptember
2013(Table7).Theshareofdomesticdebtincreased,whilethatofforeigndebtdeclined,despiteasizeable
increaseinStateOwnedEnterprises(SOEs’)foreignindebtedness,albeitfromalowerbase(Figure10).The
foreigndebtsforSOEsarelargelyguaranteedbythegovernment.Byend-December2013,totalgovernment
guaranteeswereequivalentto6percentofGDP,whichiswithinthesetsafetytargetof10percentofGDP.
Therefore,therapidgrowthinSOEs’foreigndebt,probablyposeslimitedfinancialstabilityriskduringthenext
six months.
This is an estimated figure.
6
17PageFinancial Stability Report - March 2014
Figure 10: Credit to Corporations, 2005 - 2013
Table 7: SOEs and Private Sector Debt Breakdown
N$ Millions 2009 2010 2011 2012 2013 2013
Dec Dec Dec Dec Jun Dec
Private Sector (Foreign) 11065 15742 24149 23827 29709 26096
Private Sector (Local) 13155 15013 15876 20049 21110 22702
SOEs (Foreign) 1510 1401 1389 1455 2860 4129
SOEs (Local) 499 316 453 592 1176 727
Total 26229 32472 41867 45923 54855 53654
Foreign (% Total) 47.9 52.8 61.0 55.1 59.4 56.3
Local (% Total) 52.1 47.2 39.0 44.9 40.6 43.7
Corporates’foreigndebtservicepeakedinthethirdquarterof2013,beforelevellingofftoaboutN$800
million in the last quarter of the year(Table8).Theimplementationofthereferreddebt-equityswapbyalocal
miningcompanyballooneddebtservicecostsrecordedinQ3-2013.Thereafter,quarterlydebtservicecosts
convergetoaveragelevelsregisteredinthepreviousthreeyears(samequarter).
Table 8: Foreign Private Sector Debt and Debt Servicing N$ Million 2009 2010 2011 2012 2013 2013 2013*
Q4 Q4 Q4 Q4 Q2 Q3 Q4
Total Foreign Private Sector Debt 11065 15742 24149 23827 29709 18925 26096
Total Foreign Private Sector Debt Servicing
1402 304 473 576 1763 12741 792
18PageFinancial Stability Report - March 2014
Large Exposures
CommercialbanksinNamibiaoftenlendalargeportionoftotalcorporateloanstoindividualcompanies
and/orgroupsofcompanies inasinglesector.Bysodoing, these loanshavethepotential tobecome
asystemic risk tooverall financial stability, as thiscouldamount toexcessconcentration risk to individual
companies or sectors.
AsnotedintheSeptember2013FSR,largeexposurestothedomesticcommercialbanksgrewstrongly
duringthefirsthalfof2013.Thetotalexposuregrewby37.5percentbetweenDecember2012andJune
2013,fromN$3.8billiontoN$5.2billion(Table9).Largeexposuresofthedomesticcommercialbanksstabilized
towardstheendofDecember2013,butstillremainedsignificantforspecificsectors. Largeexposuretofishing
and tourism unwind, while exposures to manufacturing remained sizeable, but unchanged with respect to
levels reached by end-June 2013.Overall, large exposures to themanufacturing & food and transport &
logisticssectorsmadeup56percentoftotallargeexposuresduringtheperiodunderreview(Figure11).This,
per se, constitutes concentration risk for domestic commercial banks and warrants monitoring.
Table 9: Large Exposures by Sector
N$ millions 2009 2010 2011 2012 2013 2013
Dec Dec Dec Dec June Dec
Fishing(5) 385 238 228 180 65 0
ManufacturingandFood(4) 167 1024 1264 1413 1598 1512
Miningandminerals(8) 283 550 188 285 754 657
Property/Construction(10) 329 277 757 597 588 529
Tourism(2) - - 74 38 257 0
TransportandLogistics(7) 1521 785 718 913 1293 1484
Other(16) 316 1390 1212 340 619 1215
Total (52) 3 001 4 263 4 440 3 765 5 175 5 396
(Percentagechange)
Fishing(5) 35 -38 -21 -21 -64 0
ManufacturingandFood(6) 4 513 23 12 13 -5
Miningandminerals(8) -38 94 -66 52 165 -13
Property/Construction(11) -31 -16 174 -21 -1 -10
Tourism(2) 0 0 0 -49 580 0
TransportandLogistics(7) 6 -48 -9 27 42 15
Other(17) -25 339 -13 -72 82 96
Total (56) -12 42 4 -15 37 4
19PageFinancial Stability Report - March 2014
Figure 11: Large Exposures by Category
AttheendofDecember2013,largeexposuresasashareoftotalprivatesectorcreditremainedbelow
10percent,butwashigherthanthelevelregisteredatend-December2012(Table10).Theincreaseinthe
latter ratio warrants monitoring to detect possible concentration risks to commercial banks.
Table 10: Large Exposures
2009 2010 2011 2012 2013 2013
Dec Dec Dec Dec June Dec
Total Largest Exposures (million) 3 001 4 263 4 440 3 765 5 396 5 396
TotalPSC(million) 37751 41838 44575 51881 54968 59323
PSCtoBusinesses(million) 13155 15013 16411 20049 21110 22702
LargeExposurestoPSC(%) 7.9 10.2 10.0 7.3 9.8 9.1
LargeExposurestoBusinessPSC(%) 22.8 28.4 27.1 18.8 25.6 23.8
20PageFinancial Stability Report - March 2014
7
V. Performance of the Banking Sector
Since the review inSeptember2013,commercialbanking institutions remainsound,profitableand
adequately capitalised as shown in the aggregated indicators of the banking sectors. Going forward,
thecommercialbankinginstitutionsareexpectedtoremainsoundandhealthy.Profitabilityindicatorsincreased
inthelatterhalfof2013,whileatthesametimetheratioofnon-performingloansdecreasedsincethereview
in September 2013. Therewere nomajor changes observed in the sector’s structure and the fourmajor
commercial banking institutions continued to dominate the Namibian banking sector with a Herfindahl-
HirschmanIndex(HHI)of2729inDecember2013,comparedto2734pointsJune20137.
Overview of the Banking Sector Landscape
AswasalludedtointheFSRofSeptember2013,thebankingsectorlandscapegrewwiththecentral
bank granting provisional authorization to E-Bank to conduct business as a banking institution in
NamibiainJuly2013.Theprovisionallicencewasvalidforaperiodofsixmonths,duringwhichE-Bankwas
requiredtoreadyitselftocommencebankingoperations.Theprovisionallicencewasextendedforanothersix
monthsin2014.
During2013thecentralbankcarriedoutareviewtoconsolidatethecurrentlegislationsconcerning
banking institutions.ThereviewconsolidatedtheBankingInstitutionsAct,1998(ActNo.2of1998)andthe
consequentBankingInstitutionsAmendmentAct,2010(ActNo.14of2010).Thereview,amongstothers,
aims to strengthen provisions relating to foreign shareholding in banking institutions in line with the Namibian
FinancialSectorStrategy.Otheradditionalregulatoryamendmentsrelatedtodefinitionsofbankingbusinesses,
resolutionmeasuresandrecoveryplansoftroubledbankswerealsoincorporated.TheBillisexpectedtobe
tabledinParliamentin2014.
Balance Sheet Structure
Inthelasthalfof2013,thebankingsectorcontinuedtobecharacterisedbyanupwardtrendintotal
assets (Figure12).Thetotalassetsofthebankingsectorrosebyanannualgrowthof14.7percentatend
December2013,ascomparedto12.7percentatendJune2013.Netloansandadvances,whichconstitutes
over75percentoftotalassets,continuestobethemaindriverofassetgrowth,risingby7.6percentbetween
thefirsthalfandsecondhalfof2013.Withinthislendingcategory,residentialmortgagesandinstalmentsdebt,
with41percentand16.2percentshareofnetloansandadvancesasatendDecember2013respectively,rose
annuallyby15.5percentand13.5percent.
A score tending to zero is deemed extremely competitive, while a score tending to 10 000 points is deemed extremely uncompetitive (monopoly).
21PageFinancial Stability Report - March 2014
Figure 12: Banking Sector Assets and Growth Rate
Depositscontinued todrivegrowthon the liabilitysideof thebalancesheet.Deposits roseannually
by12.4percent, raising theshareof total funding-related liabilities to97.1percent in thefirsthalfof2013
ascompared to96.3percentduring thefirsthalfof2013.Currentaccounts,calldepositsandnegotiable
certificatesofdepositsrepresentedacombined80percentoftotaldepositsasatend2013(Figure12).During
theperiod,currentaccountsandsavingsaccountsgrewannuallyby22.5and15.3percentrespectively,while
fixedandnoticedepositsdeclinedby25.2percent.Thebiggestchangewasobservedfromforeigncurrency
deposits,whichincreasedby68percent.
Figure 13: Composition of Banking Institution Deposits
22PageFinancial Stability Report - March 2014
Earnings and Profitability
Profitability indicators of the banking sector continued to remain relatively high by international
standardsandreachedtheirhighestlevelsfor2013duringtheendoftheyear.Bankingsectorprofitability,
asmeasuredbyReturnonAsset(ROA)andReturnonEquity(ROE),increasedfrom2.11percentand21.98
percentattheendofJune2013to2.37percentand24.82percent,respectively,asattheendofDecember
2013(Figure14).
Netinterestincometototalincomedecreasedfrom69.67asatJune2013to68.43asatDecember2013,
while expenses8grew6.09percentforthesixmonthsendingJune2013comparedto11.99percentannual
growthforthesixmonthperiodendingDecember2013.Thecostswereattributedtoariseinstaffingcosts,
consultant and managements fees, administration and overhead, and auditing costs.
Figure 14: Return on Assets and Return on Equity
Capitalisation
In linewithpreviousperiods,during the lasthalfof2013, thebankingsector remainedadequately
capitalised, supported by retained profits9.Therisk-weightedcapitalratio(RWCR)remainedat14.4percent
forbothJune2013andDecember2013,whileTier-1risk-basedcapitalratiorosefrom10.7percentto11.5
percentduringtheperiod.TheprevailingsupervisoryfloorsfortheRWCRandTier-1capitalremainedat10.0
percentand7.0percent,respectively.
9
8 The sum of interest and other expenses.
Retained profits for the industry doubled between June 2013 and December 2013
23PageFinancial Stability Report - March 2014
Liquidity
The banking sector remained above the regulatory liquidity and asset holding10 requirements,
respectively, during the end of the year.Theliquidassetratio(liquidassetstoaveragetotalliabilitiestothe
public),acoreindicatoroffinancialsoundness,rosefrom11.1percentattheendofthefirsthalfof2013to
11.7percentattheendofthelasthalfof2013,whichremainsabovethe10.0percentrequiredlevel(Figure15).
Thebankingsectoralsoremainedabovetheregulatoryminimumassetholdingrequirements,andincreased
surplusstockbetweenJune2013andDecember2013byapproximatelyN$500million.
Figure 15: Liquid Assets and Liquid Ratio
ThecompositionofliquidassetsunderwentsomechangesbetweenJuneandDecember2013.The
largest liquid asset category continued to be the Government Treasury Bills, which increased from 54.0
percentoftotalliquidassetsasattheendofJune2013to58.7percentattheendofDecember2013.The
representationofnotesandcoinsalsoincreasedbetweenthetwoperiods,from10.9percentto12.5percent.
ThemostnoticeablechangeinliquidassetcompositionwascashbalancesheldatBankofNamibia,which
madeup3.22percentasatendDecember2013,comparedtozeropercentatJune2013(Figure16).Lastly,
a declinewas observed in the relative holdings of other liquid assets, namely strip bonds, Public Sector
Enterpriseandothersecurities,aswellasotherliquidassets.
10 The minimum asset holding requirement is 10 percent of average total liabilities to the public.
24PageFinancial Stability Report - March 2014
Figure 16: Composition of Liquid Assets
Asset Quality
Creditrisk,asexpressedbytheratioofnon-performingloans(NPLs)tototalloans,startedtodecline
during the second half of the year.TheNPLratiodeclinedby0.17percentagepointsbetweenJune2013
andDecember2013,from1.46percentto1.29percentrespectively(Figure17).Thisdevelopmentisinline
withthegeneraloveralldownwardtrendinNPLsobservedsinceatleast2009.Creditriskremainedthemajor
riskontheassetsideofthebankingbalancesheet,withbanklendingcomposingapproximately76percentof
bankingassetsasatDecember2013.
Figure 17: Banking Asset Quality
25PageFinancial Stability Report - March 2014
TheoveralldeclineinNPLsatendDecember2013wasduetoadeclineinmortgageNPLs,thoughan
increase in in the weight of other forms of credit extended was observed. The weight of mortgages as
aproportionoftotalNPLsdecreasedbetweenJune2013andDecember2013,from55.7percentto53.7
percent(Figure18).However,anincreaseintheweightofinstalmentcreditasaproportionoftotalNPLs(from
12.53to13.75),overdraftsasaproportionoftotalNPLs(from13.79to14.90)andunsecuredlendinginthe
formofcreditcardloansasaproportionofNPLs(from1.40to1.86)overthesameperiodwasobserved.The
representationofpersonalloansaswellasotherloansandadvancesintotalNPL’salsodecreasedoverthis
period.
Figure 18: Non-Performing Loans by Category
ReversingthegeneraltrendobservedbetweenDecember2012andSeptember2013,theamountand
rateofdefaultrateswithintheMortgageLoanscategorydeclinedinDecember2013whencompared
toJune2013(Figure19).Thedeclineisinlinewiththeoverallfive-yeartrendobservedindefaultrateswithin
thecategorysince2009.Thedevelopmentcouldbeasaresultofmorestringentlendingrequirementsbythe
commercial banks.
26PageFinancial Stability Report - March 2014
11
Figure 19: Non-Performing Mortgage Loans
Overview of the Resilience of the Banking Sector
Thecommercialbankinginstitutionscontinuetooperate inamannerwhichensuresthat indicators
used to measure the health of the institutions remain within accordance of regulatory requirements. The
BankofNamibiaemploysdata,marketintelligenceandstresstestingmethodologytoascertainthelikelihood
ofdeviationfromtheregulatorylimits,whichcouldposeathreattothehealthyfunctioningofthecommercial
bankinginstitutions,andtakesthenecessarystepsshouldsuchascenarioarise.
Stress Testing for Capital Adequacy
StresstestingwasundertakentodeterminetheextenttowhichCoreTier1capital11 would be able to
withstand an increase in credit risk in the form of an increase in default rates. The tests were conducted
onthefourmaincommercialbankinginstitutionsinthecountry12.Stresstestingisconductedthroughamodel
which linkscreditrisktotheexpected lossesbytrends inProbabilityofDefaultandLossGivenDefault for
varioussectorsoftheeconomy.Thus,givenacommercialbankinginstitution’sexposures,themodelshocks
default rates originating from each of the sector to which it is exposed. These rates are combined with balance
sheetdata, incomestatementsandcapital returns inorder togetanestimateof the institutionsregulatory
capital level.
ForfinancialdataasatDecember2013,thestresstestexerciseindicatesthatthebankingindustryas
a whole is adequately capitalised in the event of an increase in the default rate of the sectors to which
the commercial banking institutions are exposed(Figure20).TheBankofNamibiarequiresthebanking
institutionstocarryhighercapitalbuffersthanexpectedbytheBaselIIqualifications.
Core Tier 1 capital is considered the ‘first line of defence’ capital buffer for the commercial banking institutions in an event of stress. 12 See Appendix B for stress testing methodology in the September
2013 edition of the Bank of Namibia’s Financial Stability Report.
27PageFinancial Stability Report - March 2014
Figure 20: Results of Core Tier 1 Ratio after shock administered, on an aggregate level
Interest Rate Risk
Earningswoulddecreaseovera12-monthperiodbyN$441.6million,comparedtoN$317.8millionas
atendJune2013.Thesimulationresultsalsorevealedthata200basis-pointdeclineininterestrateswould
lead toanN$9.02million increase in thebanking industry’seconomicequityvalueor,equivalently,0.0104
percentincreaseoftheindustry’scapitalvalue.Ontheotherhand,anincreaseininterestrateofthesamesize
wouldresultinequivalent,thoughoppositemovementsinearningsandeconomicvalue.
Foreign Exchange Risk
Thenetopenpositionremainedbelowthe20percentregulatorylimitandwasdeemedadequateto
safeguardthebankingsectoragainstmovementsinforeignexchangeratesinthelasthalfof2013. The
ratioofforeigncurrencyassetsandliabilitiestocapitalinthebankingsectordeclinedfrom3.0percentatthe
endofJune2013to0.15percentattheendofSeptember2013,beforeincreasingto0.64percentattheend
ofDecember2013(Figure21).
28PageFinancial Stability Report - March 2014
Figure 21: Net Open Position as Percentage of Tier-1 capital
29PageFinancial Stability Report - March 2014
13
VI. Performance of the Non-Banking Financial Sector13
SincethelastFSRreportofSeptember2013,thebalancesheetsofnon-bankingfinancialinstitutions
remain healthy. This isexpectedtocontinue in thenextsixmonths.NBFIscontinuetoregisteradouble-
digitgrowthduringtheyearof2013.Theprovidentinstitutionsremainedwellcapitalised,withsolvencylevels
exceedingthestatutoryrequirements.Investmentinstitutionsinvestedmostoftheirassetslocallyinlinewith
regulatoryrequirementsandtheriskappetiteoftheirclients.
Thenon-bankfinancialsectorperformsasignificantroleofchannellingsavingsandtransferofriskof
the public and corporate bodies.TheassetsoftheNBFIarerelativelylargeconstituting149percentofthe
country’snominalGDPor259percentofthemoneysupply(Table11).AsofDecember2013pensionfunds
and long term insurersoriginatedacombined80percentof theassetsof the industry,mostofwhichare
administeredbyunittrustmanagementcompanies,investmentmanagersorbythemselves.
ComparedtothesizeoftheassetsoftheNBFIsasreportedintheSeptember2013FSR,theindustry
grewby 19.5 percent. The growthwas driven by Pension Funds,which increased their asset size from
N$85.8billiontoN$105.3billion(Table11),mainlyonthebackofimprovedreturnsoninvestments.Similarly,
Long-term insuranceassetsgrewfromN$31.7billionasreported in theSeptember2013FSRtoN$36.4
billion.Thethirdlargestcomponent,NaturalPersons,alsogrew-fromN$17.8billiontoN$19.1billion
Table 11: NBFI assets and relative size, December 2013
Figures in N$ Millions Unit Trusts Investment Managers
Other/Direct Total % of Total
LongTermInsurance 1259 18796 16369 36424 20%
ShortTermInsurance 182 373 2906 3461 2%
MedicalAidFunds 49 320 633 1002 1%
PensionFunds 2388 71551 31328 105267 59%
Companies 8292 808 --- 9100 5%
Natural persons 19096 46 --- 19142 11%
Other 1484 3019 --- 4503 3%
Total 32 750 94 913 51 236 178 899 100%
Measure N$Millions %ofmeasure
GDP 120058 149%
Moneysupply 68958 259%
Source: NAMFISA, BON
---: No data.
This section analyses data up to December 2013 only, unless otherwise stated, due to data availability
30PageFinancial Stability Report - March 2014
Duetotheirrelativelargesizeintheeconomy,NBFIsshouldbecloselymonitoredtomitigateagainst
potentialrisks(Table12).Althoughtherewillbedoublecounting,Table12providesanoverviewofhowthe
balancesheetsofdifferenttypesofNBFIshavegrownsince2011,andtheirassetsizesrelativetoGDP.Asis
illustrated,noneofthebalancesheetdecreasedwithrelationtoGDPfortheperiodunderreview.Nevertheless,
constant monitoring is warranted.
Table 12: Size of Balance Sheets of NBFIs
Dec 2011 Dec 2012 Dec 2013
Asset Values N$ million Assets % of GDP Assets % of GDP Assets % of GDP
LongTermInsurance 26736 29 31654 29 36424 30
Short Term Insurance 2 624 3 3 001 3 3 461 3
MedicalAidFunds 768 1 858 1 1002 1
Pension Funds 69 478 76 85 757 80 105 267 88
UnitTrusts 27526 30 32106 30 37267 31
Investment Management 91 665 100 109 110 102 123 322 103
Micro-lending 1501 2 1753 2 2616 2
Nominal GDP (N$ mill) 91 658 107 323 120 058
Source: NAMFISA
GrowthwithintheNBFIsectorremainsrobust.Asat31December2013,theyear-on-yearassetgrowth
(includingloansoutstandingformicro-lenders)forNBFIsallhadpositivegrowth,from17percentformedicalaid
fundsto23percentforpensionfunds.Incomefromcontributionsandpremiumsfortheprovidentinstitutions
(long-terminsurance,shortterminsurance,pensionfundsandmedicalaidfunds)increasedby4.8percentto
N$14.9billionfortheyear2013(Figure22).
Figure 22: Premium and Contribution Growth of Provident Institutions
0
1000
2000
3000
4000
5000
6000
7000
2011 2012 2013
N$
mill
ion
Long Term Insurance Short Term Insurance Medical Aid Funds Pension Funds
Source: NAMFISA
31PageFinancial Stability Report - March 2014
SimilartotheSeptember2013FSRreport,providentinstitutionsremainadequatelycapitalised,with
the solvency levels remaining above the statutory requirements and thus sufficient to withstand any
risk.Thisisexpectedtocontinuegoingforward.Asubstantialproportionoftheliabilitiesofpensionfunds
andlong-terminsurersareassociatedtoinvestmentperformance,thuscapitalmarketvolatilitiesareborneby
policyholdersormembers.Consequentlytheseinstitutionsaresparedfrompotentialsolvencyproblems(the
onlyexceptionisthedefinedbenefitfundswhichareguaranteedbytheirrespectiveemployers).Short-term
insurersandmedicalaidfundsontheotherhandsetasidesolvencycapitaltocaterforanycapitalmarket
volatility.
About50percentoftheassetsofNBFIsareinvestedinthedomesticmarket,includingdual-listingson
the NSX.Pensionfundsinvestaround40percentinNamibia,30percentinCMA(almostexclusivelySouth
Africa) and30percentoutsideof theCMA.However,most assetsofNBFIs (includingpension funds) are
placedwithUnitTrustsandInvestmentmanagers.RefertoFigure23foranoverviewofthejurisdictionalasset
allocationofinvestmentmanagersandunittrustschemesandFigure24fortheassetallocationinformation
ofpensionfunds.Accordingly,investmentmanagersandunittrustsinvests,about50percentinNamibia,40
percentinCMA(almostexclusivelySouthAfrica)andonlyabout10percentoutsidetheCommonMonetary
Area(CMA).
Figure 23: Jurisdictional Asset Allocation of Unit Trusts & Investment Managers (Combined)
Source: NAMFISA
32PageFinancial Stability Report - March 2014
Figure 24: Jurisdictional Asset Allocation of Pension Funds
Source: NAMFISA
SincethelastFSRofSeptember2013,theassetallocationcontinuestoreplicatetheliabilitiesandrisk
appetite of institutions and investors(Figure25).Unittrustsinvestedmorethan55percentoftheirassets
inmoneymarketinstruments.Thisisinlinewiththeriskappetiteofandinstructionsfromtheirmainclients
(naturalpersons).Investmentmanagersontheotherhandinvestedabout50percentoftheirassetsinequity
andapproximately30percentinmoneymarketinstruments.Thiswasexpectedgiventhefactthatmostof
their clients arepension fundsand long-term insurers.Similarly, pension funds investedabout65percent
oftheirassetsinequityand20percentinfixedincome.Theseassetclassessuits(explicitandimplicit)their
liabilities.TheassetallocationoftheseNBFIisexpectedtocontinueinthenextsixmonths.
Figure 25: Asset allocation of unit trusts, investment managers and pension fund, December 2013
Source: NAMFISA
33PageFinancial Stability Report - March 2014
Thegrowthofthecapitalmarketremainslacklustre.Despitethatthemarketcapitalisationoflocallylisted
shares (NSX listings) increasedby69percentduring2013, theaggregatedomesticmarketcapitalisation
remains lowatslightlyoverN$18.7billionat31December2013, in relation to theassetswhichprovident
institutionsaremandatedtoinvestinNamibia.Providentinstitutionsareobligedtokeep35percentoftheir
assets locally.Asat31December2013,pension fundsand long-term insurersexceededdomesticassets
(inclusiveofduallistedshares)requirementbyapproximatelyN$11billion(Figure26).
Figure 26: Domestic Asset Requirement of Pension Funds and Long-term Insurers versus Available Local Investments 14
Source: NAMFISA
Goingforward,thestronggrowthofprovidentinstitutions’andthelimitedstockoflocalequityonthe
NSX may inflate the prices of assets and reduce liquidity on the NSX. Despite the fact that provident
institutions are the largest investors in Namibia, there are other institutions which compete for the same
assetsandconsequentlyputfurtherpressureontheprices.Thusthereisaneedtocontinuemonitoringthe
developments of these assets, however it is expected that the excess assets of pension funds and long term
insurer will be absorbed into the banking sector.
Going forward, the exposure of the banking sector to NBFIs is expected to continue to increase.
Domesticassetrequirementsonprovidentinstitutions,robustgrowthinNBFIsandthebiasofunittruststo
moneymarketinstrumentswill increaseNBFIs’investmentinbankingproductsandthiswarrantcontinuous
monitoring.
14Domestic Assets are calculated to include of NSX free float available
for trading, Government stock, Treasury bills and other corporate
paper. Dual listed shares bought through the NSX are also included.
34PageFinancial Stability Report - March 2014
15
VII. Payments Infrastructure and Regulatory Developments
The payment and settlement systems have performed satisfactorily and exhibited a high degree
of availability since the previous Financial Stability Report (FSR) in September 2013. The payment
infrastructurescontinuetooperateeffectivelyandefficientlywithnomajoroutages.Someoperationalcontrols
arebeingreviewedinordertofurtherstrengthenefficiencies.
The Bank continues with its normal on-going off-site monitoring oversight activities aimed at the
management and resolution of identified operational issues as per the Risk Based Oversight Framework.
TheBankparticipatesonanon-goingbasisinincidentanalysistoidentifywaystopreventsuchincidentsin
the future.
NISSpaymentsduringthesecondhalfof2013increasedcomparedtothefirstsemesterof2013.NISS
paymentsduringthesecondhalfof2013averaged4104paymentspermonthsettled,ata totalvalueof
N$268billion.ThevolumeofpaymentssettledinNISSdecreasedby5percentwhereasthevalueincreasedby
5percentwhencomparedtothesameperiodin2012.Thevalueoftheshareofgrosspayments15 processed
inNISSwas59percentoftotalvaluesettledinNISS,whilstthatoftheretailsystems16was41percentoftotal
valuesettledinNISS(Figure27).
Figure 27: Value of Payments Processed in NISS
Source: Bank of Namibia
Interbank and customer payments 16 The EFT, Cheque and NamSwitch systems
35PageFinancial Stability Report - March 2014
Settlement Windows
Since the last FSR, the likelihood of operational and settlement risks increased slightly as the proportion
ofpayments, intermsofvalue,settledinWindow3increased (Figure28).Settlementwindowperiods
forpaymentssubmittedandprocesseddaily indicatethataround38percentorN$107billion inpayments
wassettledinWindow1(08h00to12h00);21percentorN$56billion,inWindow2(12h00to15h00)and
37percentorN$102billion, inWindow3 (15h00 to16h40).Thus,more thana thirdof thesettlement in
termsof value tookplaceduringWindow3, attributedmainly to theextensionsgranted in thesettlement
ofdiarisedElectronicFundsTransfers(EFT)andcreditcardbatchesthatusuallysettleinWindow1,dueto
operationalissuesexperiencedbytheserviceprovideraftertherecentmigrationofthesepaymentstreams
tonewsystems.Tominimizeoperationalandsettlementrisks,itisidealthatthemajorityofallsettlementtake
placeintheearlierwindows,i.e.Windows1and2.
Figure 28: Values Settled Per Settlement Window in 2013
Source: Bank of Namibia
Disruptions to the Namibia Interbank Settlement System (NISS)
AnumberofdisruptionstoNISSwererecordedoverthesecondhalfof2013,butdidnotposeany
majorthreattofinancialstability.Theoverseerswerepromptlynotifiedofoperationalproblemsaffecting
NISSandthesolutionsthereof.TheNISSavailabilityratiowas99.68percentwhichwasabovetheacceptable
availability levelof98.5percent.Thesystemwasnotavailable for a total of14hoursattributedmainly to
connectivityandcommunicationsoutages(Figure29).Thenon-availabilityofthesystemwasofatemporary
natureandwasovercomewithinareasonableperiodoftimeandposednomajorthreattofinancialstability.
Twodisasterrecoverytestsweresuccessfullyconductedduringthesecondhalfof2013.
36PageFinancial Stability Report - March 2014
Figure 29: NISS Performance Outages
Security of Retail Payments
When calculated as a proportion of the total amount transacted by Namibians using cheques and
paymentcards(i.e.debit,cheque/hybrid,credit,etc.),fraudtosaleslossesdeclinedto0.01percent
during the secondhalf of 2013with a turnover ofN$18.4 billion (compared to 0.03percent in the
first half of 2013when the turnoverwasN$16.8 billion).The payments industry continues tomonitor
signs of emerging fraud trends and maintains collaborative efforts with enforcement agencies and consumer
associations to avert fraud incidents involving retail payment systems. This has contributed to on-going
enhancements to business practices to better protect consumers against new methods of perpetrating fraud,
while a sustained consumer education programme has also helped to increase public awareness on fraud
prevention measures.
Future Developments in Payment and Settlement Systems
TheBankhasundertakentoobtainaccurateandup-to-dateinformationabouttherelativecostsof
payment services in order to attain the objective of cost-effectivenesswhile ensuring the smooth
functioning of payment systems, which is a primary responsibility. The information on the costs of the
provisionofpayment services is critical to theBank in termsof ascertaining theefficiencyof theNational
PaymentsSystem(NPS).Assuch,duringthecourseof2014thecentralbankwillbedevelopinganindustry-
basedpaymentservicescostingmodelbasedontheactivitybasedcosting(ABC)method.
Additionally, in line with improving the effective functioning of the NPS a determination providing
theguidingprinciplesforassessingefficiencyoftheNPSwasgazettedinDecember2013,effective
31 December 2014. Furthermore, during the second half of 2013, the Bank signed a Memorandum of
Understanding(MoU)governingtherelationshipbetweentheBankofNamibiaandthreeothercentralbanks,
i.e.SouthAfricaReserveBank(SARB),theCentralBankofLesothoandtheCentralBankofSwaziland, in
termsof theperformanceof jointoversightof theSADCIntegratedRegionalElectronicSettlementSystem
(SIRESS). This is the regional system catering for cross-border settlement and time critical or high value
paymentsbetweentheSADCcountries.
37PageFinancial Stability Report - March 2014
VIII. Concluding Remarks and Policy Actions
Concluding Remarks
Risks toNamibia’sdomesticfinancialsystemremainbroadlyunchangedsince the issuanceof the
September2013FSR.Theexternalenvironment,whilestillfragile,appearsmorebenignthaninitiallyprojected,
with diminished concerns over Fed’s abrupt exit from itsQEpolicy thatwould pose extremeburdens on
emergingmarkets’exchangeratesandcapitalflows.Improvedeconomicperformanceinadvancedeconomies
andsustainedrelativelyhighgrowthinleadingemergingmarketsbodewellforglobaltradegoingforward.On
the domestic front, the rapid rise in household indebtedness ratios warrants monitoring, although the evidence
fromthecommercialbanks’balancesheetsindicateslimitednon-performingloans,whilethehouseholds’debt
serviceburdenremainsrelativelystable.Corporateindebtedness,particularlyforeignborrowingbydomestic
residents,hasalsobeenstablesincelate2013,butanumberoffinancialoperations,includingasizeabledebt-
equityswapbyaminingcompanyandnewforeignborrowing,meritoversightbytheregulator.
The commercial banking institutions remain stable, profitable and adequately capitalised, as was
indicated by the developments in the sector and confirmed by stress testing exercises. During the
periodunderreviewprofitability indicators increasedwhiledefaultratesfellwhencomparedtotheprevious
FSR.Thesefactors,coupledwithgrowingliquidassets,indicateanimprovedsituationintermsofcreditrisk
and liquiditymismatch compared to the assessment in theSeptember 2013FSR. Lastly, the commercial
banking institutions have also increased their core tier ratios. Notwithstanding the above, the concentration of
banking assets in mortgage assets remains a concern.
BalancesheetsoftheNBFIsremainrobust,butdeemedcontinuousgoingforward,duetotheNBFIs’
linkages to the regional and foreign capital markets.NBFIsremainascreditorsontherestoftheworld,
withsizeablenetforeignassetpositions.Thus,anyforeignfinancialmarketcontagionmightaffecttheirforeign
assetholdings.Onthedomesticfront,investorscitethelackofdomesticassetstoinvestinamajorconstraint
for the sector.
The payment infrastructures continue to operate effectively and efficiently withoutmajor outages.
Someoperationalcontrolsarebeingreviewedinordertofurtherstrengthenefficiencies.
Policy Actions
PrivateSectorDebt
Households
• ThelevelofhouseholdindebtednesswarrantsmonitoringasnotedinSeptember2013FSR.
Corporations
• RisksofcorporatedebtremainlowandunchangedfromearlierFSRassessments,butwarrantmonitoring
going forward, especially taking into account new corporate debt and debt service costs increase .
Large exposures to manufacturing, as well as to transport and logistics, also warrant oversight due to
concentration risks.
38PageFinancial Stability Report - March 2014
17
Banking Sector
• Routineandconcertedworkonliquiditystresstestingisrecommendedasawaytodeterminetheresilience
againstvulnerabilitiespresentedbymaturitymismatching.
• Exposure risk, especially to themortgagemarket, remains a concern and as such thework into the
feasibilityof introducingamacro-prudential tool tomitigate the risk (in the formof loan-to-value limits)
shouldcontinueasitwasannouncedintheMarch2013FSR.
Non-Banking Financial Sector
• InlinewiththeFinancialSectorStrategy,effortstodevelopthedomesticcapitalmarketarestillnecessary.
AdeepenedfinancialsectorcanallowNBFIstoinvestinthedomesticfinancialmarketsandhencereduce
the foreign risk exposure.
• Extendingtheyieldcurveonlong-datedsecuritiesisrecommendedtomitigaterisksstemmingfromNBFIs’
sizeableinvestmentsinshort-termmoneymarketinstruments.Anextendedyieldcurvecouldalsoserve
as a leading indicator to private sector issuance of long-term debt.
Payment Infrastructure and Regulatory Developments
• Duringthefirsthalfof2014,theBankwillconductaNISSComplianceAssessmentwiththenewPrinciples
ofFinancialMarketInfrastructures(PFMIs)andanon-siteriskassessmentbasedontheBank’sRiskBased
OversightFramework.ThiswouldensurethatNISSaddressalltheidentifiedtechnical,managementand
operationalcontrolgapstofullycomplywithinternationalbestpractice.
• Aspartof itscontinuedmulti-layeredapproach to tackling fraud, theBank fullysupports theFinancial
InstitutionsFraudandSecurityCommittee(FIFSC)17 with its on-going efforts to reduce fraud in Namibia.
Inthisregard,investmentsinfraudpreventionremainimportant,andshouldcontinueinordertoreduce
fraud losses over the longer term.
The Committee consists of the Bank of Namibia, the Police, representation from the long-term insurers, representation from the Mobile Network Operators, the commercial banking institutions and representation from the non-banking financial institutions forum.
39PageFinancial Stability Report - March 2014
Appendices
Appendix 1: Financial Soundness Indicators
Table 1: Financial Soundness Indicators
Jun ‘12 Dec ‘12 Jun ’13 Dec ‘13
Number of banking institutions 5 5 6
Total assets of banking institutions
(N$‘000000) 62,886 67,068 70,068 76,989
Assets/GDP 65.5 65.0 61.4 63.8
Capital Adequacy (%)
Tier1leverageratio 8.5 8.0 8.0 8.5
Tier1capitalratio 11.5 10.9 10.7 11.5
TotalRWCR 14.5 14.2 14.4 14.4
Asset Quality
NPL/Totalgrossloans 1.4 1.3 1.5 1.3
Grossoverdue/Totalloansandadvances 3.9 3.6 7.3 4.1
Provisions/Totalloans 1.3 1.2 1.3 1.2
Provisions/NPLs 93.0 91.6 86.6 92.3
Specificprovision/NPLs 32.0 29.4 26.5 29.5
Earnings and Profitability
Returnonassets 2.0 2.2 2.1 2.1
Returnonequity 20.2 22.7 22.0 20.9
Net interest margin 5.4 5.6 5.4 4.1
Cost to income ratio 61.4 52.6 56.9 55.6
Liquidity (%)
Liquidassetstototalassets 11.1 10.9 10.2 10.7
Totalloans/Totaldeposits 84.5 85.6 87.8 86.4
Totalloans/Totalassets 73.0 74.5 75.4 74.8
40PageFinancial Stability Report - March 2014
18
Appendix 2: Debt Methodology - Household Debt
HouseholdDebt
This paper uses two measures to attempt to estimate the extent of household indebtedness in Namibia.
Firstly, theratioofhouseholddebt tohouseholddisposable income;andsecondly, thedebtservicingcost
of householddebt togrosshousehold income.As there isnomeasureof household indebtedness, there
iscurrentlynomeasureofnationalhouseholddisposable income,sobothmustbecalculated,orproxied.
Similarly,thereiscurrentlynoaccepteddebtservicingcostcalculated,sothistoomustbeestimated.
Disposableincome
Usingdata from theNationalAccount andNationalBudget a broad indicationof disposable incomewas
calculatedfromthefollowingequation:
Nationaldisposableincome=wagesandsalaries+inwardremittances+pensions+subventiontoveterans
+othersocialgrants–personalincometax………………………………………………………………..(1)18
Wagesandsalaries,personalincometaxes,andinwardremittanceswerecollectedfromthenationalaccounts
publishedbytheNationalStatisticsAgency(NSA).Thisdataincludessalariespaidbythepublicandprivate
sectors,howeverdoesnotcaptureinformalsectoractivitiesorsubsistencefarmingintheirentirety.Pensions,
subvention to veterans, and other social grants data were collected from the National Budget documentation
from2003to2013,andcapturealltransfersfromgovernmenttohouseholds.
Given that not all income is captured in the national accounts and budget documentation, an effort was
madetoestimatetheexcludedpartofsuch.Acomparisonwascarriedoutbetweenthe2009/2010National
HouseholdIncomeandExpenditureSurvey(NHIES2009/2010)withregardstoincomeandconsumption,and
thefigurescalculatedinequation1above.
Householddebt
Ameasureof householddebtwas taken fromBONstatisticsonhouseholdcredit from formal institutions
(includingFirstNationalBankofNamibia,StandardBankofNamibia,NedbankNamibia,BankWindhoek,
AgribankofNamibia,NationalHousingEnterprise,andtheNamibiaPostOfficeSavingsBank).
However,theFinScopesurveyof2011indicatesthatonly65percentoftheNamibianpopulationiscurrently
banked with formal financial institutions. As such, approximately 35 percent of the population remains
unbanked.Whileasignificantpercentofthepopulationisunbanked,thisisnottosaythattheydonothave
debtinsomeformorother.Astherearenodataonnon-bankcreditextensiontohouseholds,itwasassumed
thatonly65percentofthecountry’shouseholdshaveabsorbedthetotalhouseholddebtrecordedbyBoN.
Also,weassumethatthosewhoareunbankedaremorelikelytobelowerincomeearnersthanthosewho
arebanked.Assuch,whileweassumethatonly65percentofthepopulationarebanked,usingdatafromthe
NHIESonincomedeciles,weassumethatthoseunbankedformthethreeandahalflowestincomedeciles.
Further,duetoalackofdatainformingthecontrary,weassumethattheunbankedpopulationhasthesame
Outward remittance data was unavailable
41PageFinancial Stability Report - March 2014
incometodebtratioasthebankedpopulation(implyingsignificantlylowernominaldebthowever).Finally,as
wehavenoevidenceotherwise (anddespitecommonperceptionand/oranecdoticevidence);weassume
thatthereisnotsubstantialhouseholddebtinthebankedpopulationthatisnotcapturedbycreditfromformal
institutions to households.
Debtservicetoincomeratio(DSR)
Inordertocalculatethedebtservicetoincomeratio,thefollowingstandardformulawasusedtoestimatethe
repaymentcostofdebt(principalandinterest).
.....…………………………………………………………......……..………..(2)
WhereAistheannualdebtservicingcost,ristheannualinterestrate,pistheprincipal(outstanding)andnis
theperiodoftheloan(outstanding).
TheabovecalculationwasestimatedforthedisaggregatedhouseholddebtfigurescollectedbyBON,using
different values for the interest rates, outstanding principal and outstanding period of loan. The outstanding
principalamountsweresimplythoserecordedbyBONineachofthefollowingcategories:mortgageloans,
overdrafts, other loans and advances, leasing, instalment credit and other. Outstanding period of loans were
estimated based on the average duration of the class of loan, under the assumption that loans are paid off
over the period rather than rolled over. The average interest rates for the various classes of loans are collected
byBON,andwereusedunaltered.Forthoseloanclassificationsforwhichnoaveragerateexisted(i.e.,other
loansandadvancesandother),theprimeratewasusedasabenchmark.
Oncethecostofservicingdebthadbeencalculated,thiswasdividedbythegrossincome(unadjusted)based
onthecalculationinequation1,excludingthesubtractionofincometax(soastoderivegross,ratherthannet
income).
DSR=A/IG ……………………………………………………………………………......………(3)
WhereDSRisthedebtservicetoincomeratio,Aistheannualdebtservicingcost,andIGisgrossincome.
Asitisbroadlybelievedthatarelativelysmallpercentofthepopulationholdsthevastmajorityofthenation’s
formalsectordebt,anadjustedratiowascalculated.Thisadjustmentassumedthatthewealthiest30percent
ofthepopulation(representing68percentoftheincome19)heldalloftheformalsectordebt.
19 NHIES, 2010
A=12( r12 p
1 - (1+ )r
12- 12n (( (
42PageFinancial Stability Report - March 2014
20
Appendix 3: Methodology – Corporate Debt
Broad corporate debt levels
InordertoassesstheoveralllevelofcorporateindebtednessinNamibia,asimplecalculationwasdoneadding
corporatedebttolocal institutions(privatesectorandparastatals,ascollectedbyBoN)totheinternational
investmentposition(IIP)figuresonprivatesectordebttoexternalinstitutions.Itwasassumedthatallprivate
sectordebtowedtoforeign institutionswasborrowedbycorporationsratherthanhouseholds.Theoverall
debtfigureswerethencalculatedasashareofnominalGDP.
Large exposuresThe sample of the largest exposures to local commercial lending institutions encompasses on average
approximatelytenpercentoftotal(locallyissued)privatesectorcreditextensionfortheperiodunderreview.
InformationontheselargeexposurestotheNamibiancommercialbankinginstitutionswasaggregatedand
assessedbysector.Atotalof52companieswereassessed, includingfivefishing, fourmanufacturingand
food,eightminingandminerals,tenpropertyandconstruction,twotourism,seventransportandlogisticsand
theremaining16fromvariousothersectors.
Whilethe largestexposurestothecommercialbanking institutionsarecertainly importantfor localfinancial
stability,itmustbecautionedthatanumberofthesebigcorporateclients(andothercorporates)tendtohave
otheravenuesoffunding,usuallyfromoutwiththecountry.Assuchitisnotpossibletocaptureeveryaspect
andnuanceofcorporatedebttogiveaperfectpictureanditshouldthusbenotedthatthesizeandinfluences
oftheenterprisesinthesampleunderreviewissuchthattheirdebtwillnotbewhollycovered,asdebtissued
instruments and funding from sources outside of the commercial banking institutions are not available - for that
arigorousstudyofthecompleteauditedfinancialstatementswouldbeneeded,somethingwhichiscurrently
not possible20.
Not all the companies in the sample make their balance sheets and income statements publically available. Few of the sample companies are public companies.
43PageFinancial Stability Report - March 2014
Appendix 4: Estimation challenges for household indebtedness
The challenges that surround determining the level of household indebtedness in Namibia are numerable,
butnotinsurmountable.Aswithmanysuchexercises,theprimarychallengeisovercomingdataconstraints,
irregularitiesand(perceived)inaccuracies.Asaresultofthis,alargenumberofassumptionsmustbemade,
whichmay,ormaynotbecorrect.Someoftheseassumptionsmayhaveadramaticimpactoncalculations
anddata,thusifincorrect,mayyieldinaccurateresults.
More specific challenges include:
Currentlythereislimitedinformationonthebreakdownofcredittoindividuals,whetherbankedorunbanked.
Theassumptionthatismadeisthatallhouseholdssharethesamedebtburden,whichclearlymaynotbethe
case.Itispossiblethat(intheextreme)10percentofthehouseholdsholdallthedebt,and90percenthave
none.Thisisunlikely,butequallyunlikelyisthatallhouseholdshaveequaldebt.GiventhatNamibiaisavery
unequalsociety,itislikelythatdebtissimilarlyunevenlydistributed(possiblyintheinverse,ifoneassumesthat
thepoorneed,andthuswithdraw,moredebt)
Currently,thereisnomeasureoftheextentofinformalsectordebt,andthusitisunclearwhethersuchdebt
issignificant incomparisontoincomesandformalsectordebt.Shouldsuchdebtbesubstantialrelativeto
either,theremaybecauseforconcern.Measuringsuchinformalsectordebtischallenging,ifnotimpossible,
particularlyincaseswhensuchdebtisinformalloansbetweenfamilyandfriends.Inacountrywithasignificant
unbankedpopulation,suchasNamibia,itislikelythatsuchinformalsectordebtwillberelativelylarge(relative
toformalsectordebt)whencomparedtomoredevelopedcountrieswithhigherpercentageofthepopulation
banked(assumingthatindividualsprefertoborrowfrombankinginstitutionsifpossible).
Householddebttodisposableincomedoesnotanalysethefullbalancesheetofindividuals,andthusdoesnot
necessarilyillustraterisk.AsmanyNamibiansholdsubstantialassets,beitlivestock,propertyorotherwise,
theirdebtlevelsmaybehighlysustainable.Shouldsuchindividualsholdasubstantialshareoftotalhousehold
debt, there is perhaps less cause for concern than if such debt was in the hands of those without assets.
Similarly, comparing the debt to disposable income ratio ofNamibians to that of other nationsmaybe ill
advisedasNamibiansmayhavemore,orfewer,assetsontheirpersonalbalancesheets.
Furtherchallengessurroundtheassumptionsmadeinthecalculations,moredetailsofwhichcanbefoundin
the next section.
44PageFinancial Stability Report - March 2014
Key Assumptions
Income
Challenge Assumptions Shortcomings
Determining disposable income Itisassumedthatthemajorityofthesources
ofincomeinthecountryiscaptured.
It is possible (likely) that some sources of
income might be missed.
Calculating the extent to which our the calculations underestimate disposable income over time
It is assumed that thedifferencebetween
theNHIES2009/2010 incomefiguresand
staff estimates are constant (or close to)
over time.
It is highly unlikely that this differential is
constant over time, however it may be
close. On the other hand, it is possible that
thesimilaritybetweenourestimateandthe
NHIESmaybe the exception, rather than
the norm.
Debt
Challenge Assumptions Shortcomings
65 percent of the population is banked, but does this mean 65 percent of the income is banked?
It isassumedthatwhile65percentof the
population is banked, significantly more
than65percentof thehousehold income
is banked. It is assumed that thepoorest
35percentofthepopulationareunbanked,
and thus (with NHIES data) only 11.5
percent of the income is unbanked.
It is highly likely that the penetration of
bankinginthepoorestsectorsofsocietyis
lower than in the richer sectors, however, to
assume thatallof thepoorest3.5deciles
ofpopulationareunbanked is likely tobe
inaccurate.
It is likely that the unbanked population is leveraged to some degree, however no data exist on such.
Due to lack of data indicating otherwise,
an assumption is made that the unbanked
population has the same debt to income
ratio as the banked population.
Itisunlikelythatthisisthecase.Itmaybe
that borrowing from banking institutions
is easier than borrowing from informal
lenders, which would suggest that the
debt to income ratio for those borrowing
fromformallendersmaybehigher.Onthe
otherhand,itmaybethecasethat(asper
previous assumptions) the poorer sectors
ofthepopulationareunbanked,butrequire
credittosurvive,andarethusmorehighly
leveraged than the richer, banked, sectors
of population.
It is possible that those sectors of society that are banked may have formal and informal sector credit.
Theassumptionisthattheydonot. Simply given the lack of evidence to the
contrary,itisassumedthatindividualswith
access to bank credit, do not borrow from
theinformalsector.Thismaybewrong.
45PageFinancial Stability Report - March 2014
Other
Challenge Assumptions Shortcomings
It is unlikely that the debt and income of the nation are shared equally.
As limiteddataexists toshed lighton the
distributionofhouseholddebt,Itisassumed
that it is equally distributed amongst all
household. It is further assumed that
incomeissimilarlyevenlydistributed.
While it is known that income is unevenly
distributed, it is not known how household
credit isdistributed. It isunlikely thatdebt
isdistributedequally,orrelativetoincome.
46PageFinancial Stability Report - March 2014
Appendix 5: Performance of the Non-Banking Financial Sector
Long-TermInsurance
Table 2: Income and Expenses
2012 2013
(N$000) Q4 Q1 Q2 Q3 Q4
PREMIUM INCOME
“SinglePremiumsRA 181713 177166 221918 345668 232277
“SinglePremiumsOther 536639 525544 270014 590277 294255
“RecurringRA’s 55072 55023 63383 58675 66285
“RecurringOther 781647 808690 849551 878244 951230
“TOTAL PREMIUMS 1 555 071 1 566 423 1 404 866 1 872 864 1 544 047
“INVESTMENTINCOME 1363984 899631 507863 1783728 1146148
OTHERINCOMEANDFEES: 103130 150012 177208 123345 99280
TOTAL INCOME 3 022 185 2 616 066 2 089 937 3 779 937 2 789 475
“BENEFITS
“Death 116 366 118 492 144 447 165 611 136 829
“DisabilityandHealth 44311 34740 48630 57260 36810
“Maturityclaims 424107 201777 491028 375398 274942
“AnnuityBenefits 130643 129892 130727 138419 157154
“RetirementBenefits 62230 94 0 3766 1175
“Group member withdrawals -15870 178767 164775 277691 250879
“Surrenders 154048 155951 186454 153381 439041
“TOTAL BENEFITS 915 835 819 713 1 166 061 1 171 526 1 296 830
“SalesRemuneration 98620 89808 94205 125563 131295
“Adminandmarketing 168405 160482 190330 185347 242266
“AssetManagementFees 10875 9674 11975 17517 29008
“Re-insurance 22544 18362 16722 20009 46200
Other expenses -95 -93 366 -324 1215
“TOTAL EXPENSES 300 349 278 233 313 598 348 112 449 984
“IncomeTax 19336 15925 15977 14599 21109
“Stampduties 8520 11334 7720 6692 11315
“VATonimportedservicesnotrecoverable 2147 1650 2258 1957 2743
“OtherinputVATnotrecoverable 2131 2261 1027 1151 1277
“TOTAL TAXATION 32 134 31 170 26 982 24 399 36 444
“
“Excessofincomeoverexpenses 1773867 1486950 583296 2235900 1006217
“Transferto(from)shareholderfund -312988 -74659 -317454 -209696 -405652
INCREASE/(DECREASE) IN LONG-TERM FUND
1 460 879 1 412 291 265 842 2 026 204 600 565
47PageFinancial Stability Report - March 2014
Table 3: LTIIndustryBalanceSheet
2012 2013
(N$000) Q4 Q1 Q2 Q3 Q4
Assets
Cash 389757 339848 258509 409136 387073
Balances with banks 3653333 4184773 4319727 4498959 5727477
Gilts/Bonds 3476853 3807986 3311617 3198025 3717377
Policyloans 302640 307857 317136 331712 339551
Mortgagebonds 156 167 407 693 1163
Debentures 195871 281509 259726 279505 6052
Claims/Debtors 1160791 1473751 1235220 1599686 1160819
Shares:Listed 4685570 5680666 7599738 8551665 4968265
Shares:Unlisted 1924060 1979977 2008927 2863644 2619994
Fixedassets 543237 545159 569676 599379 384676
Foreignassets-CMA 11798195 12022727 9976168 10379938 13484239
Foreignassets-Offshore 3520816 2771879 2710814 3068093 3408184
Other 2545 4049 21717 202895 218886
Total Assets 31 653 824 33 400 348 32 589 382 35 983 330 36 423 756
“Liabilities:
Policyliabilities 27127614 28206973 28115780 30120341 30937929
Current liabilities 924998 1132870 984280 1209637 1158579
CAR 623724 578015 604405 616635 648783
Excess Assets 2 977 488 3 482 490 2 884 917 4 036 717 3 678 465
48PageFinancial Stability Report - March 2014
Short-Term Insurance Table 4: Income and Expense
(N$ 000)
2012 2013
(N$000) Q4 Q1 Q2 Q3 Q4
Gross premiums written 589989 715600 666647 736536 669369
Net reinsurance expense 187928 195386 184492 231288 221912
Net premiums written 402061 520214 482155 505248 447457
Premiums earned 408 334 559 511 448 569 481 199 447 434
Claims incurred 247921 372276 287281 305392 239809
Commissions 46357 67731 49624 67335 67154
Expensesincurred 61529 71545 63275 78905 68616
Administrationfees 17583 19387 16681 6369 15679
Underwriting surplus 34 944 28 572 31 708 23 198 56 176
Investmentincome 31408 33013 33191 36117 34454
Capital gains 22946 10418 3704 19937 41981
Otherincome/(expenses) -2681 -2335 -2689 -2623 -5836
Reservedecrease/(increase) -5363 -3031 -10934 -1571 -4173
Profit before tax 81 254 66 637 54 980 75 058 122 602
Performance ratios
Cession ratio 32% 27% 28% 31% 39%
Net loss ratio 61% 67% 64% 63% 54%
Expenseratio 31% 28% 29% 32% 34%
Net combined ratio 91% 95% 93% 95% 87%
49PageFinancial Stability Report - March 2014
Table 5: Balance sheet
2012 2013
Q4 Q1 Q2 Q3 Q4
(N$000)
Assets
Cash 82649 96393 91579 95463 97800
Balances with banks 1197463 1291407 1319945 922266 1335926
Bonds,Securities,Bills 228499 209868 424259 733238 256517
Outstanding premiums 99591 185959 203089 110388 209771
Reinsurancedeposits 1975 1972 9541 114895 4325
Mortgagebonds 71685 61364 50268 50507 63239
Debentures - - - - -
Debtors 282476 242103 311191 299375 306824
Shares-Listed 162807 114697 106531 114905 121529
-Unlisted 171106 204686 194774 195236 279419
Unitsinunitstrusts 309073 343607 171901 468262 429118
Land&buildings 3462 1350 3641 3633 1126
Fixedassets 15790 17412 20855 22100 25439
Other assets 352141 309765 305378 292061 330447
Total Assets 2 978 717 3 080 583 3 212 952 3 422 329 3 461 480
Liabilities Q4-2012 Q1-2013 Q2-2013 Q3-2013 Q4-2013
Unearnedpremiumprovision 824565 898878 931742 972620 965968
Outstanding Claims 199034 216876 222760 243374 206092
IBNR 125380 98703 111324 115888 117833
Contingencyreserve 163298 159959 170893 172466 176334
Unexpiredriskprovision 272284 274349 302318 297592 291510
Duetoinsurers&reinsurers 38762 49149 40150 60866 66515
Reinsurancedeposits - - 7 7 7
Bank overdrafts - 243 225 18 -
Provisionfortaxation 13022 43403 15942 19254 5202
Provisionfordeferredtax 25650 23183 22341 24781 27581
Contingent liabilities 42 201 159 159 133
Other(Specify): 300986 275690 285848 336794 350450
Current liabilities 270996 234187 285285 321514 348146
Total Liabilities 2 234 019 2 274 821 2 388 994 2 565 333 2 555 771
Total Industry Equity 744 698 805 762 823 958 856 996 905 709
Solvency Ratio 25.00% 26.20% 25.60% 25.00% 26.20%
50PageFinancial Stability Report - March 2014
Medical Aid Funds Table 6: Income and expense
2012 2013
Q4 Q1 Q2 Q3 Q4
(N$000)
Contributions received 508188 571408 578345 578884 586937
Savings Plan Contributions 19 496 20 747 20 932 21 093 20 780
Reinsurance (596) 7420 8255 (380) 4959
Net Contribution 489288 543241 549158 558171 561198
Claims 431 291 454 275 503 284 556 644 448 009
Underwritingsurplus 57997 88966 45874 1527 113189
Administration fees 43 822 45 492 44 890 50 105 47 344
Operational expenses 10216 9735 9049 8861 11199
Managed Care: Management Services 7 918 7 356 9 733 9 455 8 962
Consultantfees/professionalfees 1177 834 1057 773 792
Total Expenses 63 133 63 417 64 729 69 194 68 297
Surplusoperations (5136) 25549 (18855) (67667) 44892
Other income 10 870 579 510 10 029 4 651
Investmentincome 23103 25907 10158 31792 41585
Net Surplus 28 837 52 035 (8 187) (25 846) 91 128
51PageFinancial Stability Report - March 2014
Table 7: Balance sheet
2012 2013
Q4 Q1 Q2 Q3 Q4
(N$000)
ASSETS
Non-currentAssets 715938 739806 744134 770504 819397
Property,Plant&Equipment 11747 11756 11751 11738 11736
Investments 704191 728050 732383 758766 807661
Current assets 142335 198849 164535 144854 182598
Accountsreceivable 47676 64247 61782 63024 34704
Cash&cashequivalents 94659 134602 102753 81830 147894
Total Assets 858 273 938 655 908 669 915 358 1 001 995
FUNDS AND LIABILITIES
Members’Funds 660968 707460 701443 670439 759829
Accumulatedfunds 660968 706142 700080 670439 759829
Revaluationreserve–investments - 1318 1363 - -
Non-current liabilities - - - - -
Long term loans - - - - -
Current liabilities 197305 231195 207226 244919 242166
Accountspayable(creditors) 49671 54167 57125 54546 77107
Provisionforoutstandingclaims/IBNR 125234 169719 145954 179440 139957
Bank overdraft - - - - -
Savingsplanliability(otherliabilities) 19801 1320 (2326) 7098 22923
Provisionforbaddebt 2599 5989 6473 3835 2179
Total Funds and Liabilities 858 273 938 655 908 669 915 358 1 001 995
52PageFinancial Stability Report - March 2014
Pension funds Table 8: Incomeandexpenses(N$Million)
2009 2010 2011 2012 2013
Contributions received 2496 2942 3109 3874 4414
Net investment income 7033 4561 4857 11143 13288
Capital appreciation 782 845 582 866 2298
Insuranceproceeds 67 68 81 92 93
Other income 43 38 39 37 11
Total Income 10 421 8 454 8 668 16 012 20 104
Administrationexpenses 110 131 147 161 262
Investmentfees 150 140 139 140 215
Insurancepremiums 168 177 181 206 223
Other expenses 64 98 103 98 45
Total expenses 492 546 570 605 745
Netincomebeforetransfersandbenefits 9929 7908 8098 15407 19359
Net transfers -1 -135 -374 -377 -288
Benefitspaid 2088 2720 2704 3257 3885
Nettransfersandbenefitspaid 2087 2585 2330 2880 3597
Net income 7 842 5 323 5 768 12 527 15 762 Table 9: Balancesheet(N$Million)
2009 2010 2011 2012 2013
Non-current assets 53681 62960 68306 84434 103997
Current assets 2189 943 1172 1323 1270
Total assets 55 870 63 903 69 478 85 757 105 267
Fundsandreserves 53175 62696 68365 84659 103886
Current liabilities 2695 1207 1113 1098 1381
Total funds, reserves and liabilities 55 870 63 903 69 478 85 757 105 267
53PageFinancial Stability Report - March 2014
Unit Trusts Table 10: FundsunderManagement(N$Million)
2012 2013
Q4 Q1 Q2 Q3 Q4
Countryallocations
Namibia 16771 17899 18072 18122 18742
CommonMonetaryArea 14301 14512 15022 15707 16559
Offshore 1034 1246 1358 1603 1966
Total asset allocation 32106 33657 34452 35432 37267
Assetallocation
Moneymarketinvestments: 24658 25461 25193 24835 21395
Treasurybills 1797 2128 1996 1731 1454
Negotiablecertificatesofdeposit 9806 10005 9984 8907 9310
Banker’sAcceptances - - - - -
Debentures - - 3 - -
Notice, call and other deposits 4855 4621 4635 5146 5594
Other 8200 8707 8575 9051 5037
Listedequity 3602 4159 4492 4817 9179
Listed debt 2981 3160 3199 3992 3658
Unlistedequity 187 190 636 658 1704
Unlisteddebt 231 154 343 464 574
Unlistedproperty - - - - -
Other assets 447 533 589 666 757
Total Funds Under Management 32 106 33 657 34 452 35 432 37 267
Table 11: SourceofFunds(N$million)
2012 2013
Q4 Q1 Q2 Q3 Q4
Pensionfunds 1511 1971 1994 2245 2388
Short-terminsurancecompanies 198 231 286 106 182
Long-term insurance companies 1101 1121 1085 1280 1259
Medicalaidfunds 46 48 48 41 49
Unittrustschemes 4129 4332 4171 4104 4517
Companies 5413 6543 7623 8968 8292
Natural persons 17817 17954 18213 17335 19096
Other 1891 1457 1032 1353 1484
Total 32 106 33 657 34 452 35 432 37 267
54PageFinancial Stability Report - March 2014
Investment Management Table 12: FundsunderManagement(N$million)
2012 2013
Q4 Q1 Q2 Q3 Q4
Countryallocation
Namibia 55086 57601 55992 57710 58571
CommonMonetaryArea 41737 42420 43344 45290 48467
Offshore 12317 14098 14771 15726 16284
Total asset allocation 109140 114119 114107 118726 123322
Assetallocation
Moneymarketinvestments: 34036 35389 34216 34475 35280
Treasurybills 13817 14706 14651 14587 15180
Negotiablecertificatesofdeposit 4522 4176 4395 4394 4396
Banker’sAcceptances - - - - -
Debentures - - 8 - -
Notice, call and other deposits 11549 12367 11166 11073 11096
Other 4148 4140 3996 4421 4608
Listedequity 53101 55956 56104 60344 58027
Listed debt 15540 16450 16948 16704 17552
Unlistedequity 1168 1155 1350 1540 1152
Unlisteddebt 241 164 176 546 255
Unlistedproperty 376 574 602 632 650
Other assets 4678 4431 4711 4485 10406
Total Funds Under Management 109 140 114 119 114 107 118 726 123 322
Table 13: SourceofFunds(N$Million)
2012 2013
Q4 Q1 Q2 Q3 Q4
Pensionfunds 62400 65357 64698 68395 71551
Short-terminsurancecompanies 770 786 817 366 373
Long-term insurance companies 16134 16916 17040 17984 18796
Medicalaidfunds 320 293 297 309 320
Unittrustschemes 26183 27249 27072 27278 28409
Companies 555 553 755 742 808
Natural persons 24 40 327 41 46
Other 2754 2925 3101 3611 3019
Total 109 140 114 119 114 107 118 726 123 322
55PageFinancial Stability Report - March 2014
Micro-Lending Table 14: CreditExtension
2012 2013
Q4 Q1 Q2 Q3 Q4
Value of loans disbursed (N$000) 444 720 447 582 452 030 652 744 682 046
Term lenders 306467 301021 309364 513950 516430
Paydaylenders 138254 146561 142666 138794 165617
Number of loans 161 516 168 253 155 612 158 599 179 003
Term lenders 24925 26504 23770 32200 32322
Paydaylenders 136591 141749 131842 126399 146681
Average loan amount
Term lenders 12296 11358 13015 15961 15978
Paydaylenders 1012 1034 1082 1098 1129
Total value of loans (N$000) 1 752 556 1 842 390 1 977 263 2 293 735 2 615 536
Term lenders 1685290 1772657 1920250 2233283 2538299
Paydaylenders 67266 69733 57013 60452 77237
56PageFinancial Stability Report - March 2014
Notes
57PageFinancial Stability Report - March 2014
58PageFinancial Stability Report - March 2014
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