Business confidence slowly picking up

Credit uptake not impressive

05 January 2021 | Business


Despite interest rates being low to make borrowing attractive, credit extended to businesses in November last year rose by as little as 0.7% year-on-year.

According to IJG Research, the increase is attributed by a rise in demand for overdrafts by businesses operating in the wholesale and retail trade sector as well as the agriculture sector which registered growth of 7.7% month-on-month and 15.0% year-on-year.

Mortgage loans to corporates increased by 0.8% month-on-month but declined by 7.2% year-on-year.

Furthermore, Instalment credit extended to corporates, which has been contracting since February 2017 on an annual basis, remained depressed, contracting by 1.2% month-on-month and 17.2% year-on-year in November, the lowest level since early 2019.

Credit extended to individuals increased by 0.7% month-on-month and 4.1% year-on-year in November, growing at a slightly slower pace than the 4.2% year-on-year increase recorded in October, IJG pointed out.

The month-on-month growth has mostly been driven by an increase in overdrafts which grew by 5.8% month-on-month and 9.4% year-on-year indicating continued use of short-term credit by individuals.

The uptake of longer-term credit agreements like mortgages and instalment credit by individuals continued to slow. The value of mortgage loans extended to individuals rose by only 0.4% month-on-month and 4.4% year-on-year. Instalment credit grew by 0.4% month-on-month but was down by 4.1% year-on-year as new vehicle sales continue to fall, IJG added.


The overall liquidity position of commercial banks deteriorated during November, contracting by N$764.5 million to reach an average of N$2.34 billion during the month. The decline can mainly be attributed to cross-border transfers, funds mainly designated for investments.

Broad money supply rose by N$9.90 billion or 8.5% year-on-year in November while foreign reserve balances fell by N$3.84 billion or 11.2% month-on-month to N$30.52 billion in November. The fall is due to a decline in net government payments, foreign currency purchases by commercial banks and exchange rate revaluations during the period, IJG said.

Broad money includes both notes and coins, but also more illiquid forms of money such as bank deposits and treasury bills. They are also considered as 'near money' because it can easily be changed to cash.


Private sector credit (PSCE) increased by N$1.09 billion or 1.05% month-month in November, bringing the cumulative credit outstanding to N$104.68 billion. On a year-on-year basis, private sector credit increased by 2.31% in November, compared to 1.65% year-on-year in October, IJG said.

On a rolling 12-month basis, N$2.37 billion worth of credit was extended to the private sector. Of this cumulative issuance, individuals took up N$2.38 billion while corporates took up N$321.6 million. The non-resident private sector decreased their borrowings by N$337.8 million.

“With economic conditions unlikely to improve materially in 2021, we expect the trend of reliance on short-term debt by both consumers and businesses to continue.

With businesses continuing to repay their longer-term debt and de-levering their balance sheets, we are unlikely to see meaningful growth in private sector credit extension and could even see a contraction on an annual basis in the coming months”, IJG concluded.