More loan options coming

08 January 2020 | Banking

The Bank of Namibia plans to introduce securitisation, which will allow investors to design debt instruments that it will be able to repackage and sell.

Securitisation is a procedure where an issuer designs a marketable financial instrument by merging or pooling various financial assets into one group.

The issuer then sells this group of repackaged assets to investors.

Securitisation offers opportunities for investors and frees up capital for originators, both of which promote liquidity in the marketplace.

Providing an update, central bank spokesperson Kazembire Zemburuka said the plans had been released on the bank's website, with implementation in the works for June.

According to him, securitisation is a process by which relatively standard loans are pooled together and sold off to a special-purpose entity or vehicle, which will, in turn, issue marketable or tradable debt securities or debt instruments against the pooled assets to raise funding.

The central bank sought public opinion on the matter when it asked for written submissions to be presented towards the end of last year. The deadline for public commentary has since passed.

In order to provide guidance to the industry, the Bank of Namibia drafted a general notice to be issued by the minister of finance that will enable securitisation transactions to be facilitated by banks and non-banking commercial institutions in Namibia.

“In light of this, public consultations were launched and concluded on 31 January 2017,” Zemburuka said.

“By making immobilised long-term loans more liquid, securitisation could be a better way to spread the market, credit and liquidity risk to which banking institutions are exposed,” he said.

The central bank studied the concept of securitisation in an occasional paper that was published in March 2008.

According to the paper, securitisation could increase the number of investment instruments and thus contribute to the development of the financial sector.





OGONE TLHAGE

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