namibia financial stability report - namfisa

1PageNamibia Financial Stability Report - June 2015

Namibia Financial Stability ReportJune 2015

IPageNamibia Financial Stability Report - June 2015

Members of the Financial System Stability Committee

Bank of Namibia

• DeputyGovernorandHeadofFinancialStability[AlternatingChairperson]• Director:Research• Director:BankingSupervision• Director:FinancialMarkets• Director:PaymentandSettlementSystems• Director:StrategicCommunications&FinancialSectorDevelopment• AdvisortotheGovernor• ChiefRiskOfficer

Namibia Financial Institutions Supervisory Authority (NAMFISA)

• AssistantCEO(Supervision)[AlternatingChairperson]• GeneralManager:Research,PolicyandStatistics• GeneralManager:Insurance• GeneralManager:ProvidentInstitutions• GeneralManager:InvestmentInstitutions• Manager:CorporateCommunications

©BankofNamibia/NAMFISA

Allrightsreserved.Nopartofthispublicationmaybereproduced,copiedortransmittedinanyformor by any means, including photocopying, plagiarising, recording and storing without the writtenpermission of the copyright holder except in accordancewith the copyright legislation in force intheRepublicofNamibia.Thecontentsof thispublicationare intendedforgeneral informationonlyandarenotintendedtoserveasfinancialorotheradvice.Whileeveryprecautionistakentoensuretheaccuracyofinformation,theBankofNamibiaandNAMFISAshallnotbeliabletoanypersonforinaccurateinformationoropinionscontainedinthispublication.

Publishedby:

BankofNamibia71RobertMugabeAvenueWindhoekNAMIBIATel.:+264612835111http://www.bon.com.na

NAMFISA154IndependenceAvenueSanlamCentre,8thFloorWindhoekNAMIBIATel:+264(61)2905000http://www.namfisa.com.na

IIPageNamibia Financial Stability Report - June 2015

Bank of Namibia

Vision

Our vision is to be a centre of excellence - a

professional and credible institution - working in the

public interest, and supporting the achievement of the

national economic development goals.

MissionTo support economic growth and development in

Namibia, we

• Act as fiscal advisor and banker to the

Government,

• Promotepricestability,

• Managereservesandcurrency,and

• Ensure sound financial systems and conduct

economic research.

Values

• We value high-performance impact and

excellence.

• We uphold open communication, diversity,

integrityandteamwork.

• Wecareforeachother’swell-being.

NAMFISA

VisionNAMFISA’svisionistobearespectedregulatorofthe

financialsectorthatfostersastableandsafefinancial

systemcontributingtotheeconomicdevelopmentof

Namibia.

MissionNAMFISA’s mission is to effectively regulate and

supervise financial institutions and to give sound

advicetotheMinisterofFinance.

Values• Teamwork

• Service

• Integrity

• PerformanceExcellence

Corporate Charters

IIIPageNamibia Financial Stability Report - June 2015

BoN Bank of Namibia

CMA CommonMonetaryArea

DFSRM DomesticFinancialStabilityRiskMap

DI DisposableIncome

ECB EuropeanCentralBank

EMEs EmergingMarketEconomies

FNB FirstNationalBank

FSR FinancialStabilityReport

GFSR GlobalFinancialStabilityReport

HHI Herfindahl-HirschmanIndex

IMF InternationalMonetaryFund

JSE JohannesburgStockExchange

LHS Left-handSide

NAD Namibia Dollar

NAMFISANamibiaFinancialInstitutionsSupervisoryAuthority

NBFIs Non-bankFinancialInstitutions

NPS NationalPaymentSystem

NISS NamibiaInterbankSettlementSystem

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

ListofAbbreviations

IVPageNamibia Financial Stability Report - June 2015

ThepurposeoftheFinancialStabilityReport(FSR)istoidentifyrisksandvulnerabilitiesinthefinancialsystem

andassesstheresilienceofthefinancialsystemtodomesticandexternalshocks.TheReportalsoservesas

acommunicationtool.Thereportfurtherpresentspolicyrecommendationsinrespectoftheidentifiedrisks.

Lastly, thereport ispublishedto informthereaderonthesoundnessof thefinancialsystem,andwhatthe

regulatorsandgovernmentaredoinginordertomitigateriskstotheNamibianfinancialsystem.

Financialsystemstabilityisdefinedastheresilienceofthedomesticfinancialsystemtointernalandexternal

shocks, be they economic, financial, political or otherwise. It can also be described as the absence of

macroeconomiccostsofdisturbancesinthesystemoffinancialexchangesbetweenhouseholds,corporates,

andfinancialinstitutions.

ThefinancialsysteminNamibiaconsistsoffinancialmarkets,instruments,institutionsandinfrastructure.The

regulatorystructure,whilenotstrictlyapartofthefinancialsystem,playsanimportantroleinregulatingand

monitoringthesystem.UnderSection3(a)oftheBankofNamibiaAct,1997(No15of1997,asamended)the

BankofNamibiahasthemandate“topromoteandmaintainasoundmonetary,creditandfinancialsystemin

Namibiaandsustaintheliquidity,solvencyandfunctioningofthatsystem”.Thestabilityofthefinancialsystem

iscriticalasthesystemprovidesimportantservicestohouseholds,corporates,andtherealeconomy.

Thisreport isa jointeffortbetweentheBankofNamibiaandtheNamibiaFinancial InstitutionsSupervisory

Authority (NAMFISA).Thetwoinstitutions,whichareentrustedwiththeregulationofthefinancialsystemin

Namibia,workcloselytoensureahealthyfinancialsystem.ThereisalsoactiveengagementbetweentheBank

ofNamibia,NAMFISAandtheMinistryofFinancetoensureacomprehensiveassessmentofsystemicfinancial

risksandtheimplementationofpolicyactionstoensurelastingfinancialsystemstability.

Preface

VPageNamibia Financial Stability Report - June 2015

Contents

Corporate Charters iiList of Abbreviations iiiI. Introduction and Summary 1II. Summary of Risk Analysis 3 A. RisksStemmingfromtheExternalMacroeconomicEnvironment 4 B. RisksStemmingfromDomesticHouseholdandCorporateDebt 5 HouseholdSector 5 CorporateSector 6 C. RisksStemmingfromthePerformanceoftheBankingSector 6 D. RisksStemmingfromthePerformanceoftheNon-BankingFinancialSector 7 E. RisksStemmingfromthePaymentandSettlementSystem 7III. Macroeconomic Environment 8 GlobalEconomicGrowth 8 DevelopmentsintheFinancialMarkets 9 DomesticEconomy 12IV. Domestic Households and Corporate Debt Indicators 13 Corporate Debt 15 Large exposures 18V. Performance of the Banking Sector 20 OverviewoftheBankingSectorLandscape 20 BalanceSheetStructure 20 AssetQuality 21 Liquidity 23 EarningsandProfitability 24 Interestrateriskinthebankingbook 25 Foreignexchangerisk 25 Capitalization 25 Stresstestingforcapitaladequacy 26VI. Performance of the Non-Banking Financial Sector 28VII. Payment Infrastructure and Regulatory Developments 33 SettlementWindows 33 DisruptionstotheNamibiaInterbankSettlementSystem(NISS) 34 SecurityofRetailPayments 34 FutureDevelopmentsinPaymentandSettlementSystems 34VIII Concluding Remarks and Policy Recommendations 35 PolicyActions 35Appendix 1: Financial Soundness Indicators 37Appendix 2: Performance of the Non-Banking Financial Sector 38 Long Term insurance 38 Short-termInsurance 40 MedicalAidFunds 42 PensionFunds 43 CollectiveInvestmentSchemes 44 InvestmentManagement(IM) 45 Micro-lending 46


IIntroductionandSummary

1. Duringtheperiodunderreview,theNamibianfinancialsystemremainedrobust,notwithstandingsomeunfavorabledevelopments in thedomestic, regionalandglobaleconomies.The Namibian financialsystemwasstableinthesecondhalfof2014characterisedbyasound,profitableandadequatelycapitalizedbankingsectorwithlownon-performingloans.Moreover,theperformanceofthenon-bankingfinancial sector was healthy in the second half of 2014 as its balance sheets remained robust. Thepaymentsystemalsooperatedefficientlyandeffectively.ThisisdespiteanincreaseinbothhouseholdandcorporateindebtednesssincethelastFinancialStabilityReport.Householdindebtednessremainedhigherthanthatofcomparatoreconomiesandwarrantstargetedpolicymeasurestominimiseriskstothestabilityof thefinancialsystem. Inaddition, the levelof foreigndebtexposurebythecorporatesector requiresmonitoring.Ontheinternationalfront,risksofdecliningcommodityprices,financialmarketvolatilityaswellas exchange rate depreciation of the Namibia Dollar against the major trading currencies had the potential toadverselyimpacttheNamibianfinancialsystemstability.Namibia,however,withstoodendogenousandexogenousshockstofinancialstabilityintheperiodunderreview.

2. SincethelastFinancialStabilityReport(FSR),riskstofinancialstabilityfromtheglobalfinancialsystemincreased.Despiteanimprovementingrowthprospectsinsomekeyadvancedeconomies,newchallengestoglobalfinancialstabilityhavearisen.Thesechallengesentail,butarenot limitedto, loweroilprices,diverginggrowthpatternsandmonetarypoliciesbetweentheadvancedandemergingmarketeconomies(EMEs).AccordingtotheIMF’sApril2015GlobalFinancialStabilityReport(GFSR),expectationsofrisingpolicyratesintheUShavetriggeredasignificantappreciationoftheUSDollar.Inaddition,long-termbondyieldshaveturnednegativeforalmostathirdofEuroAreasovereignbonds.EMEs,especiallycrudeoil andcommodity exporters, are alsoexperiencingnewfinancial stability challengesessentiallydiminishing asset valuations and rising credit risks.Moreover, significant capital outflows from severalEMEs, includingSouthAfricahavecausedexchange rates todepreciatewith increasedpressuresoncompaniesthatborrowedinforeigncurrencies.ThesedevelopmentscouldfurtherstrainEMEs’sovereignsthathaveincreasedtheirexposuretoforeigncurrencyborrowings.Theresultingtensionsinglobalfinancialmarketshaveamplifiedmarketandliquidityrisks.

3. EconomicactivitiesinNamibiawerehealthyduring2014,despiteamoderationinrealGDPgrowth.The main engines of growth were robust construction activities, sustained growth in diamond mining, wholesale and retail trade and transport activities, as well as public infrastructure programmes. On the downside, uraniummining postedweaker performance during 2014, on account of low internationalprices. Furthermore, the after-effects of thedrought and the response to theSouthAfrican veterinaryrequirements imposed during the year, adversely affected livestock farming.Going forward, real GDPgrowth is expected to increase on account of continued robust construction work, an expected increase in mining production and activities in the wholesale and retail trade.

4. Since the lastFSR,householddebt increased,drivenbymortgages,overdraftsand instalmentcredit.Overall, the ratio of household debt to disposable income rose to 83.9 percent in December2014from82.9percentinDecember20131.Thiscallsforcomprehensivemonitoringandtargetedpolicyinterventions to address growth in household indebtedness. If left unchecked, growth in mortgages,instalmentcreditandoverdraftswouldleadtosystemicrisksinthefinancialsystem.

5. Corporatedebtlevels(asashareofGDP)increasedduringtheperiodunderreview,duetogrowthinforeignprivatesectordebt,coupledwiththedepreciationofthedomesticexchangerate. The increaseincorporatedebtwas,however,largelyascribedtoborrowingbycompanies,whichearnforeignexchangeandthusmaynotposeamajorrisktothefinancialstabilityofthecountry,atleastintheshort-

to-medium term. Nonetheless, the acceleration in the growth rate of large exposures in the banking sector, mainlytothemining,fishingandtourismsectorswarrantsmonitoringtomitigateconcentrationrisk.

1TotalcreditextendedinNamibiaiscomposedofcreditbycommercialbanksandestimatedcreditextendedbyotherinstitutions,

mainlymicro-lendersaswellasinformallending.TheratioofhouseholddebttodisposableincomereportedintheMarch2014FSR

changed, due to thedatarevisioninthefinalNationalAccounts,whichresultedinanincreaseindisposableincome.


6. The financial soundness indicators for the banking sector remain at comfortable levels byinternationalstandards,althoughsomestructuralpatternsofthebalancesheetsrequiremonitoring. Theresilienceofthecommercialbanksisregularlytested,andthecurrentstresstestingresultsindicatethatthecommercialbankinginstitutionsareabletowithstandashocktothebankingsystem.Theconcentrationof banking assets in mortgages remains high and needs continuous monitoring in light of the high level of householdindebtedness.Therewerenomajorchangesobservedinthebankingsector’sstructure,andthelargerbankinginstitutionscontinuetodominatethesector.Thebankingsector’sfinancialconditionisexpectedtoremainsoundandhealthyintheforeseeablefuture.

7. Thebalance sheetsofNon-BankingFinancial Institutions (NBFIs) arehealthyanddonotposesystemic risks to thecountry’sfinancialsystem.Overall,growthof theassetsof theNBFIssectorwaspositive.Thisisexpectedtocontinueinthenextsixmonths.SincethelastFSR,thecapitalizationofprovidentinstitutionswasadequatetoensuresolvencyandfundinglevelsinexcessofthoserequiredbystatute.These levelsaresufficient towithstandtheshocksandriskstowhichthese institutionsareexposed.

8. ThepaymentinfrastructuresinNamibiacontinuetooperateefficientlyandeffectively.Progresshasbeenmadetoensurethatthereistransparencyinthewaythenationalpaymentsystem(NPS)operatesandtoreducetheassociatedrisks.TheoverseerscontinuedtoparticipateintheanalysisofcriticalincidentsthatmayimpactthestabilityoftheNPS,aswellastorecommendwaystopreventsuchincidentsinthefuture.


SummaryofRiskAnalysis

Thissectionpresentsananalysisofthemainriskstothestabilityofthedomesticfinancialsystem.Consistent with sections III-VII in this Report, the analysis identifies risks arising from: (i) the externalmacroeconomic environment, (ii) trends in household and corporate debt, and (iii) trends in the domesticbankingandnon-bankinginstitutions’financialsoundnessindicators,beforeconcludingwith,(iv)ananalysisofthepaymentandsettlementsystem.Therisksareanalysedandratedfromlowrisktohighriskbasedontheirprobabilityofoccurrence,andthepotentialimpactonfinancialstabilityinNamibia,shouldtheriskdevelopandmaterialise(Table1).

Table1:RiskstoFinancialStabilityfortheupcomingsixmonths2

Risk ChangefromMarch2014

Probability Impact Probability Impact

MacroeconomicEnvironmentrisks

Global economic slowdown Down Unchanged

MonetaryexpansionprogrammeintheEuroArea Up Up

GradualnormalisationofUSmonetarypolicy Up Up

NAD/ZARdepreciation Up Up

Exportdemandfall Down Up

Decline in international reserves Unchanged Unchanged

Householddebtrisks

Increaseinhouseholddebt Up Up

Corporatedebtrisks

Corporate debt increases Up Unchanged

BankingSectorrisks

Bankinginstitutionmaturitymismatch Unchanged Unchanged

PaymentSystemrisks

Securityofretailpayments Unchanged Unchanged

Settlementinlastwindow Unchanged Unchanged

NBFIsrisks

Contagionamongstfinancialinstitutions Unchanged Unchanged

Assetexposuretocapitalmarkets Unchanged Unchanged

NSXassetpriceinflation Unchanged Unchanged

Riskanalysiskey

high medium low

2 The‘risk’columnpresentstheriskstofinancialstabilityasassessedgoingforwardsixmonths(i.e.July-December2015)andthe

‘change’columnpresentsthechangefromtheriskassessmentpresentedinthepreviousFSR,inthiscasetheMarch2014

FSR.


Since the issuance of theMarch 2014 FSR,most of themain risks to domestic financial stabilityremainedunchanged,withtheexceptionofrisksstemmingfromthemacroeconomicenvironmentandhouseholddebt.TheevolutionoftherisksfacingthedomesticfinancialsystemcomparedtoMarch2014isdepictedbytheDomesticFinancialStabilityRiskMap3(Figure1).

Figure1:DomesticFinancialStabilityRiskMap

A Risks Stemming from the External Macroeconomic Environment

According to the IMF’sGlobalFinancialReport forApril2015,globaleconomicdevelopmentsoverthepast sixmonths have increasedglobal financial stability risks. In this regard, the global financialsystemisbeingaffectedbyaseriesofchangesinfinancialmarkets,reflectingdiverginggrowthpatternsandmonetarypoliciesasglobalgrowthprospectshaveweakened.Deflationaryforceshavestrengthenedasoilandcommoditypriceshavedeclined.Althoughthelatterhasbenefitedcommodityandoil-importingcountriesandincreasedmonetarypolicyspaceincountrieswithhigherinflation,ithasincreasedfinancialrisksinsomeexportingcountriesandintheoilsector.Asaresultofthesedevelopments,inflationexpectationsandlong-termbondyieldshavefallen.BoldmonetarypolicyactionshavebeentakeninboththeEuroAreaandJapantoarrestandreversedeflationarypressures,whiletheexpectationsofrisingpolicyratesintheUSandadditionalmonetarystimulusbyothermajoreconomieshavegeneratedrapidappreciationoftheUSDollar.RiskshavealsorotatedfromadvancedeconomiestoEMEsand,frombankstoshadowbanksaswellasfromsolvencytomarketliquidityrisks.

ThekeytransmissionchannelsofdownsideriskstofinancialstabilityinEMEsarelargelydepreciatingexchangeratesandlowercommodityprices.Duringthesecondhalfof2014,theNamibiaDollardepreciatedonaverageby2.6percentagainsttheUSDollar,duetocapitaloutflowsfromEMEsthataffectedSouthAfrica.Thedepreciationcontinuedinthefirstquarterof2015,withtheNamibiaDollardepreciatingonaverageby8.0percentagainsttheUSDollarcomparedtothesameperiodin2014.AccountingfortherecentdepreciationwereanumberoffactorssuchassluggishgrowthoftheSouthAfricaneconomy,electricitysupplyconstraints,labourunrestsand the twindeficits inSouthAfrica. Ingeneral,depreciatingexchange rates resulted fromsignificant capital outflows from EMEs and increased pressures on companies that borrowed in foreigncurrencies.Thesedevelopmentscouldexert furtherstraintoEMEs’sovereignswith increasedexposuretoforeigncurrencyborrowings.

3TheDFSRMtrackssixriskcategoriesasshownabove.Scoresrangingfromaminimumofone(1)toamaximumofsix(6)areassigned

toeachofthesixriskfactorsbasedontheirprobabilityofmaterializingandtheirpotentialimpact.

0

1

2

3

4

5

6Macroeconomic environment

Banking sector

Corporate debt

Household debt

Non-banking financial sector

Payment and settlement systems

Mar-14 Jun-15


TheNamibianfinancialsystemcontinuedtoberobustandresilient,notwithstandingexchangeratevolatility, declining international reserves and low commodity price shocks that affectedEMEs. Asmentionedearlier,inlinewithdevelopmentsinsomeoftheEMEs’currencies,theexchangerateoftheSouthAfricanRandand theNamibiaDollarwasvolatile recently.Onaverage, theNamibiaDollardepreciatedby9.4percentforthefirstfourmonthsof2015,comparedtothesameperiodin2014.However,theimpactofaweakercurrencydidnotfilterthroughtoinflationasitnormallytakesalagbeforebeingrealised.AlthoughNamibia’sinternationalreservesremainedadequateforsustainingthefixedpegandcurrencyincirculation,theimportcoverratiodecreasedfrom2.4monthsinDecember2013to1.9monthsinDecember2014andwarrants monitoring going forward4.Thedeclineincommoditypricesthatbeganwithmetalsandfoodfouryearsagoalsoaffectedcrudeoilpricesinmid-2014andpersistedinthefirstquarterof2015.Inthisregard,the IMF’s commodity price indices for food,metals and energy declined by 6.5, 10.0, and 16.3 percent,respectively,inthesecondhalfof2014.Furthermore,theseindicessubsidedonaverageby15.9,19.7and46.0percent,respectively,inthefirstquarterof2015,comparedtothesameperiodin2014.Increasingsupplies,bumperharvests,weakdemandandastrongerUSDollarcontributedtothedecreaseinprices.Downsiderisksremainandincludehigher-than-expectedproduction,especiallyforcrudeoilandslowerdemandofnon-energycommoditiesbyChinaamidsttighteningenvironmentalstandards.

Notwithstanding the decline in commodity prices, exchange rate volatility and the imposition ofveterinary restrictions by South Africa, the Namibian economy performed well in the second halfof 2014.Key activities,whichunderpinnedgrowth,were largely robust constructionworks and sustainedgrowth inwholesaleand retail trade.For2014, realGDPgrowthwasestimatedat4.5percentsupportedbyconstructionactivities relatedtominingandpublicworksprogrammes.Onthe inflation front,Namibia’saverageconsumerpriceinflationratedecreasedin2014comparedto2013,mainlyduetoareductionintheinflationrateofthehousingcategory.Theoverallinflationrateaveraged5.4percentin2014,havingfallenfromalevelof5.6percent in2013.Thereduction inoverall inflationreflectedadecreasein inflationratesofthehousingcategory,particularlyrentalpaymentsfordwellingandelectricity,gasandotherfuels.Moreover,thedecreaseintheinternationalpricesofcrudeoilhascontributedtoadropintheinflationrateforthetransportcategoryduringthesecondhalfof2014.Goingforward,realGDPgrowthisprojectedtoexpandfurtherin2015 supported by robust constructionworks, recovery in agriculture and sustained growth inwholesale&retail trade. Inflationarypressuresarealsoexpectedtobewell-contained.Downsiderisksto inflationarepredominantly the recentupwardmovement incrudeoilpricesand thedepreciationof theNamibiaDollarversus major trading currencies.

Overall,recentdevelopmentsintheNamibianeconomy,thefinancialsystemandtheoutlookremainedhealthy,despitedownwardrevisionstoglobalgrowthanddecliningreserves.Risksoriginatingfromtheglobal financial system increased forEMEs,but aregenerallywell-contained inNamibia.Nonetheless, thenormalisationofmonetarypolicyintheUSremainsaconcerntofinancialstabilityinNamibia.ThemonetaryexpansionprogrammeintheEuroArea,however,mayposeupsideriskasitmayleadtoincreasedexportsandforeignexchangeearningsforNamibia,whichcouldboostreservesandfinancialstabilityinNamibia.

B Risks Stemming from Domestic Household and Corporate Debt

HouseholdSector

HouseholddebtasapercentageofdisposableincomeincreasedattheendofDecember2014.Intheperiodunderreview,theratioofhouseholddebttodisposableincomestoodat83.9percent,comparedto

4Traditional“rulesofthumb”thathavebeenusedtoguidereserveadequacysuggestthatcountriesshouldholdreservescovering100

percentofshort-termexternaldebtortheequivalentof3monthsworthofimports.


82.9percentregisteredattheendofDecember2013.Therisewaslargelyascribedtoahigherincreaseincredit to households relative to a slower growth in disposable income. The adjusted credit to households roseby12.4percenttoN$45.4billionattheendofDecember20145.Theestimatedgrowthof9.8percentindisposable income was not strong enough to offset that of household credit.

HouseholdindebtednessofNamibiansremainshighbyregionalandinternationalcomparisons6. This review therefore suggests that the risk of an increase in household debt in the next six months remains elevated. Thiscallsformoreconcertedeffortsinmonitoringdebtatmicroeconomiclevels,particularlyformortgagesandinstallment credit to individuals, components which dominate credit to the private sector. Otherwise, it would leadtosystemicriskinthefinancialsector.

CorporateSector

Totalcorporatedebtincreasedsignificantly,mainlyonaccountofforeigncorporatedebt.The rise in thecorporatedebt-to-GDPratiowaslargelyascribedtoborrowingbytheprivatesector.Variouscompanies,mostlymultinationalcorporationsaccessedforeignfinancialmarketstofinancetheiroperations.Despitethefact that the share of foreign corporate debt to total corporate debt is higher, a large number of corporates that borrowfromabroadearnsforeignexchange.Hence,externaldebtservicingatcurrentlevelsmaynotposeamajorrisktothefinancialstabilityofthecountry,atleastintheshort-to-mediumterm.

C Risks Stemming from the Performance of the Banking Sector

Sincethereleaseof theMarch2014FSR, theNamibianbankingsector remainedsound,profitableandadequatelycapitalized.Althoughthelevelofnon-performingloansincreasedyear-on-year,assetqualityimproved as shown by the decrease in theNPL ratio during each of the last two quarters of 2014. Theconcentration of banking assets in mortgages remains high and needs continuous monitoring in light of the highlevelofhouseholdindebtedness.Therewerenomajorchangesobservedinthesector’sstructureandthelargerbankinginstitutionscontinuetodominatethesector.Thebankingsector’sfinancialconditionisthereforeexpectedtoremainsoundandhealthyintheforeseeablefuture.

Box1:Loan-to-value(LTV)ratiosasamacro-prudentialpolicytoolinNamibia

Theglobalfinancialcrisisof2007-08broughttotheforedebateontheuseofmacro-prudentialtoolsasmeanstomaintainfinancialstability.Thiswilltypicallybeachievedbyfocusingontherisksarisingprimarily fromwithin the financial systemor risksamplifiedby the financial system.Following thefinancialcrisis,theneedtoadoptamacro-prudentialapproachtofinancialstabilityhasbecomepartofconventionalwisdominEurope,theUSandtherestoftheworld.Policymakersneededtoactfast,asthecostofinactionmaygreatlyexceedthepotentialnegativesideeffectsofpolicyintervention.

In Namibia, rising property prices and the banking sector’s exposure to the mortgage segmentremainsaconcernforpolicymakers.TheNamibianbankingindustryishighlyexposedtomortgageloans,whichconstitutemorethanhalfofthetotalloansextended.ItwasthereforehighlightedintheFinancialStabilityReportofMarch2013,theneedtoinvestigatemeansofaddressingthiscreditriskthrough macro-prudential tools such as the loan to value ratios for mortgage loans.

5Theadjustedcredittohouseholdswasderivedbyadjustingthecreditextendedtohouseholdsbyahistoricalgrowthrate.Theidea

istocapturecreditprovidedbyboththeformalandinformalsectors.

6Duetodifferencesinmethodology,theratiosforNamibiaarenotnecessarilycomparabletothoseofothercountries.


Arangeofcapital-based,liquidity-basedandasset-sidemacro-prudentialtoolsareavailabletotheBankofNamibiatomaintainfinancialstability.Theseincludeliquiditycoverageratiosandcounter-cyclicalcapitalbuffers.Oneasset-sidetoolemployedworld-wideistheloan-to-value(LTV)ratiointheresidentialmortgagemarketasameanstominimisecreditexposurerisk.TheLTVratioisafinancialtermusedbycommerciallenderstoexpresstheratioofaloanunderwrittentothevalueofanassetpurchased.

ResearchbytheBankofNamibiademonstratesthatimposingLTVlimitsonnon-primaryresidentialpropertiesinNamibiaisaviablecomplementarypolicymeasureforreducingtherisktofinancialstabilityoriginatingfrombanks’overexposuretothehousingmarket.Inthisregard,theBankofNamibia,inconsultationwiththebankingindustry,isbusydeliberatingontheimplementationmodalitiesofLTVlimitsacrossthebankingsector inthecountry. Infact,twoofthecommercialbankshavealreadyintroducedthepracticeofLTVratiosduringthelatterhalfof2013.Internationalexperience,althoughlimited, also shows that the introduction of LTV ratios tends to slow down the rate of growth of house prices as well as the incidence of houses bought for speculative purposes.

Source: Bank of Namibia, 2013: Investigating the Introduction of Loan-to-Value Limits on Non-Primary Residential

Properties, internal paper

D Risks Stemming from the Performance of the Non-Banking Financial Sector

TheNBFIs continued to prudentlymanage assets to support liabilities as per the expectations ofbeneficiariesandpolicyholders.Specifically,pensionfundsandlong-terminsurersmanageassetsofroughlyaboutN$158.0billiontomeetliabilitiesofapproximatelyN$151.0billion.Theassetsoftheseinstitutionsareinvestedthroughcollectiveinvestmentschemesandinvestmentmanagers,orotherwiseonaproprietarybasisbypensionfundsandlong-terminsurers.Theseinstitutionsinvesttheirassetsoveramediumtolong-termperiod and as such assume investment risk as a result of prolonged exposure to the domestic, regional and globalcapitalmarkets.Overall,theriskstofinancialstabilitystemmingfromtheoperationsofNBFIsremainedunchanged during the review period.

E Risks Stemming from the Payment and Settlement System

TherisksstemmingfromthepaymentandsettlementsystemchangedonlyslightlycomparedtotheMarch2014FSR.OnlyonedisruptiontotheNamibiaInterbankSettlementSystem(NISS)wasrecordedoverthesecondhalfof2014,whichdidnotposeanymajorthreattofinancialstability.TheNISSfront-endavailabilityratiowas99.9percent,whichwasabovetheacceptableavailability levelof99.0percent.Thesystemwasnotavailablefor1hour, asituationwhichwasattributedtoatechnicalissuewiththewebinterface.Thenon-availabilityofthesystemwasofatemporarynatureandwaspromptlyresolvedwithinthehour.Furthermore,one disaster recovery testwas successfully conducted during the second half of 2014. Fewer payments(i.e.34.0percent)weresettled inWindow3 in thesecondhalfof2014 (15h00 to16h40) representinganimprovementfromthe37.1percentrecordedatthetimeofthepreviousFSR.ItisidealiffewerpaymentsoccurinWindow3.Thishascontributedtoareductionintheprobabilityofoccurrenceofoperationalandsettlementrisks.


IIIMacroeconomicEnvironment

Global Economic Growth7

Theglobaleconomycontinuedtoregistermodestgrowthin2014anditisprojectedthatthistrendmaycarryonfortheremainderof2015.Thekeydriverofgrowthduring2014wastherecoveryintheadvancedeconomies,particularlytheUS,supportedbyimprovedactivitiesinotheradvancedeconomies.Overall,realGDPgrowthintheadvancedeconomiesimprovedto1.8percentin2014from1.4percentin2013.Moreover,realGDPgrowth intheUS increasedto2.4percent in2014,relativeto2.2percent in theprecedingyear,underpinnedbydomesticdemand,accommodativemonetarypolicyandmoderatefiscaladjustment.IntheUK,realGDPgrowthimprovedto2.6percentin2014,comparedto1.7percentrecordedin2013,boostedbyimprovedfinancialmarketconditions(Figure2).EconomicactivitiesintheEuroAreaalsorecoveredfromtherecessionof2013andrecordedgrowthof0.9percentin2014,duetoincreasedinvestmentandexports.Inaddition,growthintheEuroAreawassupportedbyloweroilprices,lowinterestrates,andaweakerEuro.Onthecontrary,economicactivitiesinJapanwererestrainedanddidnotadequatelysupportglobalgrowthasearlieranticipated,registeringacontractionof0.1percentin2014.

MajorEMEsregisteredslowergrowthin2014. Growth for the emerging market and developing economies slowedto4.6percentin2014onthebackofeasedactivitiesinChinaandRussia.RealGDPgrowthinChinareceded to7.4percent in2014,down from7.8percent recorded in2013.Theslowdown in theChineseeconomyispartofChina’stransitionaladjustmenttoamoresustainablegrowthtrajectoryandamoderationintherateofinvestment.RealGDPgrowthinBrazilslowedto0.1percentin2014from2.7percentin2013,duetoweakinvestment,lowbusinessandconsumerconfidence,andtightfinancialconditions.ActivitiesinRussiarecededto0.6percentin2014from1.3percentin2013,impactedbysanctionsimposedbytheEUandUS,andthedeclineincrudeoilprices.RealGDPgrowthinSouthAfricawassluggishat1.5percentonaccountofinfrastructuregaps,electricitysupplyconstraintsandtenselabourrelations.

Figure2:ProjectedGlobalGrowth

Source: IMF World Economic Outlook, April 2015

7 Theanalysiscontainedinthissub-sectionborrowssubstantiallyfromtheIMFWorldEconomicOutlook,April2015,availableon

www.imf.org/external/pubs/ft/weo/2015/01/

(2.0)

0.0

2.0

4.0

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Lookingahead,globalgrowthisprojectedtoincreasemodestlyin2015,drivenbyactivitiesinadvancedeconomies,especially theUS.RealGDPgrowth in theadvancedeconomies is expected to rise to2.4percentin2015from1.8percentin2014,mainlyduetolowcrudeoilprices,strongdomesticdemandandmoderatefiscaladjustment.DespitetheprojectedgradualriseininterestratesintheUS,arelativelygradualadjustmentinthemonetarypolicystancewillalsocontinuetosupportgrowthintheUS(Figure2).WeakerexchangeratesfortheEuroandYenwillalsocontributetotherecoveryofeconomicactivitiesintheEuroAreaandJapan,respectively.Downsideriskstogrowthincludecontinuedcapitaloutflowsfromemergingmarketsthatwill trigger furtherappreciationof theUSDollar,coupledwithgeopolitical tensions inUkraineand theMiddleEastandtheirpotentialglobalspillovers.

IntheEMEs,growthisexpectedtomoderateonthebackofaslowdowninChina’sgrowth,downwardrevisionsofgrowthprospectsformajoroilexportersandadeclineincommodityprices.AslowdowninChinareflectingamovetowardamoresustainablegrowthpatternisanticipatedtohaveadecliningimpactonrealGDPgrowthintheEMEs.Moreover,thedownwardrevisionofgrowthforoilexportingeconomies,duetolowercrudeoilprices,willcontributetoamoderationingrowthforEMEsin2015.Thegrowthoutlookfornon-oilcommodityexportersisalsoexpectedtobemodestin2015,duetodepressedpricesandsubdueddemandbyChina.SouthAfrica’srealGDPgrowth,thoughbetterat2.0percent in2015,comparedto1.5percentin2014,stillremainedsubdued.Downsideriskstotheoutlookaretheelectricitysupplyconstraints,weakgrowthofgrossfixedcapitalformationandsubduedconsumerandbusinessconfidence.

Developments in the Financial Markets

AdvancedEconomies

Volatility in global financial markets increased since the previous FSR, following a period of lowuncertainty.Changesinmarketsentiment,drivenmainlybylowercrudeoilpricesanddevelopmentsinRussiaandGreece,werereflectedinhighervolatilitiesofmajorassetclasses.StockmarketsweremoreunpredictablerecentlythanduringSeptember/November2014.Inrecentmonths,volatilitybrokeawayfromtheexceptionallows recorded inmid-2014 and increased in linewith its long-term trend (Figure 3). After adjustments inDecember2014andearlyJanuary2015,volatilityinglobalequitiesroseslightlyonthebackofloosermonetarypoliciesinbothadvancedeconomiesandEMEs.

Figure3:VolatilityIndex

Source: Bloomberg

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EmergingEconomies

Ingeneral, theriskappetite forEMEs’assetclasses is lowerpromptingcapitaloutflowsbyforeigninvestors.Lowerallocationsofglobalfundstoriskyassetsandlowerexcessreturnsalsopointtoslightlylowerriskappetitecomparedtothepastsixmonths.ElevatedvolatilityandtherapiddepreciationoflocalcurrenciesforsomeeconomiescouldjeopardisefinancialstabilityasinvestorsandspeculatorsmoveportfolioinvestmentfromEMEs.Overall,theseshockshaveincreasedfinancialstabilityrisksinEMEs,giventheincreasedleveragein the public and private sectors, and authorities need to enhance surveillance of vulnerable sectors.

Theoutlookforglobalfinancialmarketsislargelyanticipatedtobepositiveasmonetaryandfinancialconditionsareexpectedtobeaccommodative.Thisispredictedbasedonagradualglobalrecoveryandlowinflationarypressuresfromlowercrudeoilandothercommodityprices.Nonetheless,itisexpectedthatasteadynormalisationofinterestrateintheUScouldbeginlaterin2015.Onthecontrary,othermajorcentralbanks,particularly theEuropeanCentralBankand theBankofJapanareexpected tocontinuewith theirmonetaryexpansionprogrammesuntilgrowthstabilises.Inthefirstquarterof2015,centralbanksinChina,Indonesia,RussiaandThailandreducedtheirpolicyratesamidstsubsidinginflation,drivenbythedeclineincrudeoilprices tosupportgrowth.Themonetarypolicystanceof theSouthAfricanReserveBankwillbelargelydatadependent,especiallyonthetrendoftheRand/USDollarexchangerate,adjustmentinthepriceofelectricity,wagesettlementsandinflationexpectations.

Exchangeratedevelopments

CapitaloutflowsandastrongerUSDollardroveforeignexchangedepreciationsinmanyEMEssuchasSouthAfrica,BrazilandMalaysiainthelastsixmonths.Aftersubsiding inSeptemberandOctober2014,thewithdrawaloffundsfromEMEsgatheredpaceinNovember2014.AsadirectindicatorofchangingsentimentsandcarrytradetowardsEMEs,capitaloutflowsfrombothbondandequityfundsdeepenedandremainedsignificantuptotheendofApril2015andcontributedtothedepreciationofEMEs’currencies.ThedepreciationsthatstartedattheendofOctober2014,maintainedtheircoursethroughtheFederalReserve’staperingdecisionon18December2014,andacceleratedon23January2015.On thatdate, inanefforttopreserve foreignexchange reserves,Argentina’sCentralBankscaledbacksupport for thePeso,whichimmediatelydepreciatedby10percentagainsttheUSDollar.

ThedepreciationoftheArgentinianPesospreadtootherEMEsandcontributedtoareductioninthepriceofotherEMEscurrencies,includingtheSouthAfricanRand.Consequently,thenominalvalueoftheRanddepreciatedby2.6percentinthesecondhalfof2014.Afurtherdepreciationof8.0percentoccurredinthefirstquarterof2015,comparedtothesameperiodin2014(Figure4).OtherfactorsthatcontributedtothedepreciationoftheRandincludedtenselabourrelationsintheminingsector,weakrealGDPgrowthandahigher-than-expectedcurrentaccountdeficit.ThesefactorstriggeredcapitaloutflowsfromSouthAfricaandtherebyexchangeratedepreciation.


Figure4:MovementintheNamibiaDollar/USDollarExchangeRate

Source: Bloomberg

During2014,theSouthAfricanReserveBankincreasedthereporatetomitigateinflationarypressuresfromfoodandpetrolpricesaswellasexchangeratedepreciation.TheMonetaryPolicyCommittee(MPC)raisedthereporateby0.50percentatitsJanuary2014meeting,followedbyanotherincreaseof0.25percentinJuly.For2015,theMPCoftheSouthAfricanReserveBankhasthusfarkeptthereporateunchangedinlinewithdevelopmentsinthecountry’seconomicdata.InflationinSouthAfricaaveraged4.1percentinthefirstquarterof2014andremainedwithinthetargetbandof3to6percent(Table2).

Table2:SouthAfrica’sConsumerPriceIndexandAnnualizedMonthlyInflationRate(Dec2012=100)

2013 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Index 100.3 101.2 102.4 102.7 102.4 102.8 103.8 104.2 104.7 104.9 105.0 105.3

Rate(%) 5.5 5.9 6.0 5.9 5.5 5.5 6.4 6.4 6.1 5.5 5.3 5.3

2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Index 106.1 107.2 108.6 109.1 109.4 109.8 110.6 110.9 110.9 111.1 111.1 110.9

Rate(%) 5.8 5.9 6.1 6.2 6.8 6.8 6.6 6.4 6.9 5.9 5.8 5.3

Source: Statistics South Africa

TheoutlookforSouthAfrica’smonetarypolicystancewillbedrivenbyinflationexpectations.Themainfactorsthatareexpectedtounderpininflationexpectationsareelectricitytariffincreases,thetrendintheexchangerateoftheRandagainstthemajortradingcurrenciesandwagesettlements.

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Figure5:TheJSEAllShareIndex

Source: Bloomberg

Growthinglobalequitymarketsinthefirstquarterof2015wasalsoreflectedinJohannesburgStockExchange’s(JSE)AllShareIndex(ALSI).Thekeyfactorsthatsupportedtheincreaseinstockmarketindicesinthefirstquarterwerethestabilisationinoilprices,strongfourth-quarterearningsreportsfortheUSandsignsofeasingoftheGreeceandUkrainecrises.Inaddition,theEuropeanCentralBank’squantitativeeasing(QE)programme,whichwasannouncedinJanuary2015andstartedinMarch2015,alsoaddedtothegrowthintheequitymarkets.Asaresult,theALSIroseby4.5percentduringthefirstquarterof2015(Figure5above).

Domestic Economy

OutputandInflation

Although the Namibian economywas estimated to have slowed slightly in 2014, growth was stillreasonableandprojectionsfor2015indicaterobustgrowth.For2014,realGDPgrowthwasestimatedat4.5percentanditisprojectedtoincreasein2015,supportedbyrobustconstructionworksandsustainedgrowth inwholesale&retail trade.Therelativelystrongergrowthduring2014and2015 isunderpinnedbyincreasedconstructionactivitiesrelatedtotheminingandpublicworksprogramme.Namibia’sinflationrateaveraged5.4percentin2014,havingfallenfromalevelof5.6percentin2013.Thekeydriversofthedeclineininflationwerereductionsintheinflationratesofthehousingandtransportcategories,thelatterbeingaresultof declining oil prices.

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IVDomesticHouseholdsandCorporateDebtIndicators8

Household Debt to Disposable Income9

TheratioofhouseholdindebtednesstodisposableincomeattheendofDecember2014increased,comparedtothecorrespondingperiodin2013.Thetrendinhouseholddebt,whichroseby11.1percentinDecember2014from15.0percentrecordedayearearlier,mirroredthegrowthinoverallprivatesectorcredit(Table3).Althoughhouseholddisposableincomewasestimatedtohavegrownby9.8percentoverthesameperiod,itsgrowthwaslowerthanthatofhouseholdindebtedness.Thekeydriversofhouseholddebtweremortgages,overdraftsandinstallmentcredit.Mortgageloansroseby12.2percentinDecember2014from13.0percentinDecemberof2013.Similarly,overdraftsroseby19.9percentrelativetoamuchlowergrowthof15.8percentobservedinDecember2013.Installmentcreditincreasedby18.6percentinDecember2014whencomparedto16.8percentrecordedinDecember2013.Amoderationof14.5percentwasrecordedinotherloansandadvancesfrom19.2percentrecordedinDecember2013

Table3:HouseholdDebttoDisposableIncome

(N$million)

2010 2011 2012 2013 2014

HouseholdDisposableIncome 32,304 35,889 41,650 49,261 54,109

CredittoHouseholds 24,856 27,917 31,832 36,621 40,703

CredittoDisposableIncome(%) 76.9 77.8 76.4 74.3 75.2

AdjustedCredittoHouseholds 27,714 31,127 35,493 40,832 45,384

AdjustedCredittoDisposableIncome(%) 85.8 86.7 85.2 82.9 83.9

Source: Bank of Namibia

TheratioofhouseholddebttodisposableincomeinNamibiaishighercomparedtoSouthAfrica’s,notwithstandingthemethodologicaldifferences.Asaproportionofdisposableincome,mortgageloanswereestimatedat50.3percentduringDecember2014inNamibia,whichishigherthanSouthAfrica’sshareof 37.2percent over the sameperiod. Investment in housing is expected to boost householdwealth butcouldhoweverposefinancialstabilityconcernswheneconomicagentsarehighlyleveraged.Incaseinterestratesareadjustedupwards,thedebt-servicingcapacityofmortgagorswithfloatingrateloanswillbeplacedunderstrain.Atpresent,interestratesinNamibiaareatahistoricallylowlevelandhence,renderingtherisktofinancialstabilityminimal,atleastintheshortterm(Figure6).Althoughhouseholdindebtednessisnotanimmediate cause for concern in the near future, it warrants monitoring.

8TheanalysisofthehouseholddebtwasintroducedintheOctober2012FSRissueoftheBankofNamibia,andallmethodological

issueswithregardtodebtindicatorsarecoveredinthatreportandalsointheMarch2014FSR.

9 The ratio of household debt to disposable income is calculated based on income and tax data from the national budget documents,

national accounts and household debt data from the Bank of Namibia.


Figure6:SelectedInterestRates2010-2015


Growth in household debt inNamibia exceeded that of disposable incomeduring 2014,while theoppositewasthecaseinSouthAfrica.Explainingtheabovedevelopmentwasthegrowthinmortgages,overdrafts and other loans and advances (Figure 7). Despite a slowdown in both disposable income andhouseholddebtinSouthAfricaduring2014,growthindisposableincomewasstillhigherthanthatofhouseholddebt. This implies that South African households deleveraged in anticipation of an upward adjustment ininterestratesduring2014. Inaddition,thecreditceilings legislatedthroughtheNationalCreditAct (No34,2005)alsoplayedasignificantroleinthisphenomenon.

Figure7:Growthinhouseholddebtanddisposableincome


Namibia’s household debt to disposable income ratiowas aboveSouthAfrica’s during the periodunderreview10.Inthisregard,Namibia’sdebtratioat83.9percentofdisposableincomeduring2014washigherthanSouthAfrica’sof77.6percentrecordedinDecember2014(Figure8).

10ThemethodologyforcompilinghouseholddebtinNamibiacoverscreditextendedbycommercialbanksaswellastheinformal

sector,whileinSouthAfrica,itonlyincludesloansandadvancesextendedbybanksandconsumercredit.

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Figure8:HouseholdDebttoDisposableIncome:NamibiaandSouthAfrica

Source: Bank of Namibia and South African Reserve Bank

DebtServicingRatio

The debt service11 to disposable income ratio in Namibia increased slightly in December 2014,comparedtothetimewhenthepreviousFSRwasreleased.Thekeydriversoftheincreaseinthedebtserviceratioweredebtservicesforoverdrafts,mortgagesandother loansandadvances.Thiscouldpartlybeattributed toan increase in the repo rateof theBankofNamibia inAugust2014and thesubsequentadjustment incommercialbanklendingrates(Table5).Debtalso increasedfasterthandisposable income,which also contributed to the deteriorating ratio.

Table5:DebtServicingRatios(%)

GrossIncome

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AnnualDebtServicingGrowth(YoY)

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Income

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AveragePrimeRate

Dec10 9.0 8.0 0.0 18.0 15.0 19.0 11.0

Dec11 13.0 11.0 14.0 20.0 15.0 19.0 10.0

Dec12 17.0 16.0 13.0 20.0 15.0 18.0 10.0

Dec13 17.0 18.0 14.0 19.0 14.0 18.0 9.0

Dec14 13.0 10.0 19.0 16.0 16.0 19.0 10.0


Corporate Debt

Theleveloftotalcorporatedebtstockrosesignificantlyduring2014,largelyasaresultofgrowthinforeignprivatesectordebt.AsaproportionofGDP,corporatedebtincreasedto51.4percentinDecember2014 from an estimated 47.6 percent at the end of December 2013. The increase in foreign debt wasunderpinnedbycompaniesthatborrowedfromabroadtofinancetheiroperations.

11Thedebtserviceratiogaugesthefinancialburdenthattherepaymentofdebtplacesontheaveragehouseholdrelativetoitsincome.

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SincethelastFSR,theleveloftotalcorporatedebtincreasedonaccountofforeignprivatedebt.Inthisregard,totalcorporatesectordebtgrewby26.0percenttoN$74.9billioninDecember2014,relativetothesameperiodin2013.ComparedtoDecember2013,foreigndebttotheprivatesectorroseby29.4percent(Table5).Theriseinforeigncorporatesectordebtwasmainlytriggeredbyincreasedborrowingbytheprivatesector,coupledwiththedepreciationofthenationalcurrencyduring2014.

AttheendofDecember2014,thecorporatedebt-to-GDPratioincreasedcomparedtothecorrespondingperiodin2013.Theriseinthecorporatedebt-to-GDPratiowaslargelyascribedtocompanies,mostlymulti-nationalcompaniesinvariouseconomicsectorsthataccessedforeignmarketstoborrowfundsforfinancingoftheiroperations.Itishoweverworthnotingthatasizeablenumberofthecorporatesthatborrowedfromabroadearnsforeignexchange.Hence,externaldebtservicingatcurrentlevelsmaynotposeamajorrisktothefinancialstabilityofthecountry,atleastintheshort-to-mediumterm.

Table5:DomesticandExternalCorporateDebt(PrivateSectorandParastatals)

2010 2011 2012 2013 2014

Domesticdebt(%) 47.8 36.2 44.2 39.4 37.8

Foreigndebt(%) 52.2 63.8 55.8 60.6 62.2

Domesticdebt(N$million) 15,797 16,864 20,641 23,429 28,350

Foreigndebt(N$million) 17,256 29,680 26,014 35,989 46,604

TotalDebt(N$million) 33,053 46,544 46,655 59,418 74,954

YoYChangein%inTotalDebt 11.8 40.8 0.24 27.4 26.2

NominalGDP(N$million) 82,534 90,120 106,895 124,863 145,744

Debt-to-GDPratio(%) 40.0 51.6 43.6 47.6 51.4


TheprivatesectorcontinuedtoaccountforamajorshareoftotalcorporatedebtattheendofDecember2014.Inthisregard,theshareofprivatesectorintotalcorporatedebtwas95.0percent,remainingalmostunchangedcomparedtoDecember2013.Theremainderofthedebtwasheldbythestate-ownedenterprises(SOEs).TheprivatesectorcorporatesowedanestimatedN$72.2billionat theendofDecember2014,ofwhichN$43.5billionwasowedtoforeignlenders,whileN$28.4billionwaslocally issued(Table6).Foreignprivatesectordebtincreasedby29.5percentinDecember2014comparedtoDecember2013.Akeyfactorthatdrove thegrowth in foreignprivatesectordebtwas increasedborrowingbycorporates in theminingandenergysectors.Moreover,privatecreditextendedtothebusinesssectorroseby21.3percentbetweenDecember2013andDecember2014onthebackofinstallmentcreditandoverdrafts12. The stock of bonds issuedbyNamibiancorporatesontheNamibianStockExchangeincreasedfromN$4.0billionduring2013toN$4.6billionin2014,representingagrowthof15.0percent.Ofthisoutstandingbalance,N$3.0billionwasissuedbycommercialbanks.

12Businessesnormallyusethesefacilitiestofinancemachineryandequipment,aswellasvehicles.


Table6:SOEsandPrivateSectorDebtBreakdown

N$Million 2010 2011 2012 2013 2014

ForeignPrivateSectorDebt 15,742 27,538 23,827 31,878 43,455

LocalPrivateSectorDebt 15,481 16,411 20,049 22,702 28,364

ForeignDebtofSOEs 1,514 2,142 2,187 4,111 3,149

LocalDebtofSOEs 316 453 592 727 799

TotalCorporateDebt 33,053 46,544 46,655 59,418 74,954

ForeignDebttoTotalDebt(%) 47.6 59.2 51.1 53.7 58.0

LocalDebttoTotalDebt(%) 46.8 35.3 43.0 38.2 37.8


Total debt outstanding by SOEs decreased in December 2014 relative to December 2013, whichminimiseditsrisktofinancialstability.AttheendofDecember2014,SOEsowedatotalofN$3.9billion,ofwhichN$3.1billionwasowedtoforeignlendersandN$799.3milliontolocallenders(Table6).Anincreaseof10.0percentwasobservedinthelocaldebtportfolioofSOEs,whilethetotalforeigndebtofSOEsdecreasedby23.0percentbetweenDecember2013andDecember2014.TheincreaseinthelocaldebtwascausedbytheissuanceofcorporatebondsbySOEsontheNamibianStockExchange,whichaccountedforN$1.4billionofthetotalamountissuedin2014.ItisexpectedthatcorporatebondissuancebyNamibianSOEswillcontributetocapitalmarketsdevelopmentandfinancialsectordeepeninginthecountry.ThedeclineinforeigndebtobligationswasattributedtorepaymentsbysomeSOEsinthetransportindustry.

TherisktothefinancialsystemstemmingfromforeignloanguaranteesdiminishedsincetheissuanceoftheMarch2014FSR.AccountingforthisdevelopmentweretherepaymentsofloansgrantedtotheSOEsinthetransportandenergysectors.Loanguaranteestoexternalcreditorsdecreasedslightlyby0.6percenttoN$6.7billioninDecember2014.Consequently,theratioofforeignloanguaranteestoGDPdecreasedby0.6percentagepointto4.7percentattheendofDecember2014.Thisratiowaswithinthesafetybenchmarkof10.0percentofGDP.

Table7:ForeignPrivateSectorDebtandDebtServicing

N$Million2010 2011 2012 2013 2014Dec Dec Dec Dec Dec

TotalForeignPrivateSectorDebt 15,742 27,538 23,827 31,878 43,455

TotalForeignPrivateSectorDebtServicing 1,315 3,510 2,562 15,534 6,302


AttheendofDecember2014,foreignprivatedebtservicingcostsdeclinedsignificantlyby59.4percenttoN$6.3billion(Table7).ThisdeclinewasmainlyattributabletoahighbasescenarioobservedattheendofDecember2014,duetotherestructuringofforeignloans,13coupledwiththedepreciationofthelocalcurrency.

13Duringtheperiodunderreview,therewasaconversionofdebtintoequitycapitalintheminingsector.Thistransactioninfluencedthe

stockpositionofbothforeigndebtoutstandingandforeigndebtservicing,asrecordedintheInternationalInvestmentPosition(IIP).


Large exposures

Thebankingsector’slargeexposureshavebeengrowingatanincreasingratesince2013. Total large exposures amounted toN$13.2billion as at the endofDecember 2014, recording a higher year-on-yeargrowthrateof42.9percentincomparisonto16.4percentin2013(Figure9).Thisaccelerationwasdrivenbyexposurestoallsectors,themostdominantbeingtheminingandmineralssector,whichgrewby69.5percent.Withzeroexposurein2013,largeexposurestothefishingandtourismsectorsreboundedtoN$219.6millionandN$92.8million,respectively.

Figure9:Bankingsectorlargeexposuresandgrowthrate


Thesectoralcompositionoflargeexposureschangedsignificantlyduring2014. The relative share of the manufacturingandfoodsectorshrunkfrom23.4percentto18.4percent,whileexposurestothetransportandlogisticssectordecreasedfrom20.8percentto16.5percent(Figure10).Ontheotherhand,theshareoftheminingandmineralssectorincreasedby3.9percentagepointsto24.6percent,whilethefishingandtourismsectorsre-enteredthelargeexposureportfoliowithrespectivesharesof1.7percentand0.7percent.Theremaining24.9percentofthelargeexposureswasroughlyevenlydistributedbetweensevencorporateborrowers outside the aforementioned sectors. The fact that the mining and minerals, and manufacturing and foodsectorsconstitutedacombined43.0percentoftotallargeexposuresisasignalofconcentrationriskfordomestic commercial banks and warrants monitoring.

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Asaproportionoftotalprivatesectorcredit(PSC), largeexposuresincreasedto19.3percentduring2014from15.7percentattheendofDecember2013(Table8).Inrelationtoprivatesectorcredittobusinesses,largeexposuresincreasedfrom41.0percentto46.9percent.Bothratiosrequiremonitoringtodetectpossibleconcentration risks to commercial banks.

Table8:Largeexposuresinrelationtoprivatesectorcredit

(N$million) 2010 2011 2012 2013 2014

TotalLargeExposures 6191 8562 7997 9305 13296

TotalPSC 41838 44575 51881 59323 69067

PSCtoBusinesses 15013 16411 20049 22702 28364

LargeExposurestoPSC(%) 14.8 19.2 15.4 15.7 19.3

LargeExposurestoBusinessPSC(%) 41.2 52.2 39.9 41.0 46.9


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VPerformanceoftheBankingSector

SincethereleaseoftheMarch2014FSR,theNamibianbankingsectorremainedsound,profitableandadequatelycapitalized.Assetqualityimprovedasshownbythedecreaseinthenon-performingloan(NPL)ratioduringeachofthelasttwoquartersof2014.Theconcentrationofbankingassetsinmortgagesremainshigh and needs continuous monitoring in light of the high level of household indebtedness. There were no majorchangesobservedinthesector’sstructureandthelargerbankinginstitutionscontinuetodominatethesectorwithaHerfindahl-HirschmanIndex(HHI)of2712inDecember2014comparedto2729inDecember2013.Thebankingsector’sfinancialcondition isexpectedto remainsoundandhealthy in the foreseeablefuture.

Overview of the Banking Sector Landscape

During2014,thebankingsectorlandscapegrew,withtheBankofNamibiaissuingonefinalbankinglicenseandthreeprovisionalbankinglicenses.ThefinalbankinglicensewasgrantedtoE-BankLimited,which has since commenced banking operations, while provisional licenses were granted to Letshego Bank Namibia Limited,BankBICNamibia Limited andBancoPrivadoAtlantico Europa, SA (Namibian branch).TheprovisionalauthorizationsofLetshegoBankNamibiaLimitedandBancoPrivadoAtlanticoEuropa,SA(Namibianbranch)weresubsequentlyextendedforsixmonthsattherequestoftheapplicants.

Inaddition,theBankofNamibia,inconsultationwiththeNamibianCompetitionCommission,grantedapprovaltoTrustcoGroupHoldingsLimitedtoacquireabank.Trustco Group Holdings Limited, a non-bankfinancialinstitution,wasgivenauthorizationtoacquireFidesBankNamibiaLimitedandchangeitsnameto Trustco Bank Namibia Limited. Trustco Bank Namibia Limited will operate under the on-going supervision andregulationoftheBankofNamibiaasamicro-financebankinginstitution.

TheBankofNamibiacontinuedwith itsexercise toconsolidate theBanking InstitutionsAct, 1998(ActNo.2of1998)andtheBankingInstitutionsAmendmentAct,2010(ActNo.14of2010),aswellas to incorporate additional regulatory amendments thatwere considered necessary.Following thecompletionofsuccessfulstakeholderconsultationsin2013,theBankingInstitutionsBillwillbeforwardedtoCabinetforconsiderationandthereaftertabledinParliament.TheBillisexpectedtobeenactedin2015.

Balance Sheet Structure

Thetotalassetsofthebankingsectorcontinuedtogrowatarobustpace,albeitatalowerratethanwhatwasrecordedayearearlier.Totalassetsgrewat13.2percentattheendofDecember2014comparedto14.8percentattheendofDecember2013(Figure11).Netloansandadvances,whichconstituted74.5percentoftotalassets,remainedthemaindriverofassetgrowth,risingby16.9percentyear-on-yearattheendofDecember2014.

Thegrowth in thesector’s loanportfoliowas largelydrivenby residentialmortgagesand instalmentcredit,whichconstituted38.7percentand16.2percentoftotalloansandadvancesasattheendofDecember2014andgrewannuallyby11.9percentand18.8percent,respectively.


Figure11:BankingSectorAssetsandGrowthRate


On the capital and liabilities side of the balance sheet, deposits continued to be themain driverofgrowth.Deposits represented79.9percentof capital and liabilitiesandgrewby12.0percent.Currentaccounts,negotiablecertificatesofdepositandcalldepositsconstitutedacombined78.1percentof totaldepositsasat31December2014(Figure12).Theremainingportionofthedepositbaseconsistedoffixedandnoticedeposits,savingsdepositsandforeigncurrencydeposits,withsharesof13.6percent,4.6percentand3.7percent,respectively. Figure12:CompositionofBankingSectorDeposits


Asset Quality

Creditrisk,asmeasuredbythenon-performingloanratio,startedtodeclineduringthesecondhalfof2014.TheNPLratiofirstincreasedfrom1.3percentto1.5percentduringthefirsttwoquartersof2014beforedecliningto1.2percentoverthesecondhalfoftheyear(Figure13).Thisratiowasalsolowerwhencomparedtotheendof2013,whenitstoodat1.3percent.

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Thelevelofnon-performingloans,however,increasedyear-on-year.Non-performing loans increased at anannualrateof9.8percenttoN$821.3million, largelyduetotheincreaseinnon-performingmortgages.Overall,thecompositionofnon-performingloansdidnotchangesignificantly,withthenotablechangesbeingtheincreaseintherelativeshareofmortgagesfrom53.8percentto55.3percent,andthedecreaseintherelativeshareofoverdraftsfrom14.9percentto12.5percent.Instalmentsalesandleases,personalloansandoverdraftsrepresented12.6percent,8.3percentand1.6percentofnon-performingloansrespectively,whileotherloansandadvancesrepresented9.7percent.

Figure13:Non-performingloansandtheNPLratio


Inproportiontototalmortgageloans,non-performingmortgageloansdeclinedfrom2.0percentto1.5percentduringthelasttwoquartersof2014(Figure14). Figure14:Non-performingmortgageloans


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Liquidity

During2014,thebankingsectorcontinuedtoholdliquidassetswellinexcessofthestatutoryminimumliquidassetrequirementof10percentofaveragetotalliabilitiestothepublic.Theliquidityratioincreasedto12.5percentattheendofDecember2014from11.7percentattheendofDecember2013(Figure15).ThebankingsectorhadsurplusliquidityholdingsofN$2.0billionovertherequiredlevels.

Figure15:LiquidAssetsandtheLiquidityRatio


Despitestatutorycompliance, the trend inanotherkey liquidity indicator, the loan-to-deposit ratio,warrantsclosemonitoring.Theloan-to-depositratioincreasedfrom90.8percentto94.4percentattheendofDecember2014,indicatingthatlendingactivitiesexertedmorepressureoncoredepositsasasourceoffunding.Nevertheless,thefactthattheratiowasbelowtheinternationalbenchmarkof100percentindicatesthatcoredepositsremainedsufficienttofinancelendingactivities.

Governmenttreasurybillscontinuedtobethelargestcomponentofthesector’sliquidassetholdings.Theshareofgovernmenttreasurybillsdeclinedto50.7percentattheendofDecember2014comparedto58.7percentayearbefore(Figure16).ThesecondbiggestcomponentofliquidassetswasclearingbalanceswithBankofNamibia,with a higher shareof 16.1percent compared to9.4percent at the endof 2013.Emergingthirdwascurrencyincirculation,whichincreasedfrom12.5percentto13.2percentinproportiontototalliquidassets,followedbygovernmentbondswithareducedshareof12.5percentcomparedto12.7percentoneyearbefore.

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Figure16:CompositionofLiquidAssets


Somepotentialforliquidityriskduetostructuralfactorsremainsinthebankingsector.Firstly,theratioofwholesaledeposits to retaildeposits in thebankingsector remainsasymmetricatapproximately70:30,indicatingthatthesector’sdepositbaseremainsdominatedbypotentiallyvolatilefundingsources.Secondly,theproportionofthesector’sdepositsthat isattributabletothe10 largestdepositors increasedfrom25.5percentto26.0percentduringtheperiodunderreview,signallinganincreaseindepositconcentrationrisk.

Earnings and Profitability

The profitability indicators of the banking sector remained relatively high at the end of December2014.Thereturnonassets(ROA)andreturnonequity(ROE)ratiosstoodat2.4percentand24.0percentrespectivelyattheendof2014,remainingalmostunchangedrelativetotheendof2013(Figure17).

Figure17:Profitabilityratios


During2014,thebankingsectorrecordedanincreaseinitstotalincome.Total income grew at an annual rateof19.6percenttoN$1.8billion.Thisgrowthwaslargelydrivenbynetinterestincome,whichroseby24.1percentandrepresentedaslightlyhighershareof56.8percentintotalincomefrom56.2percentattheendof

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2013.Expenses,ontheotherhand,increasedby15.1percentyear-on-year,largelyasaresultofincreasesinstaffcosts,administrationandotheroverheads,andconsultancyandmanagementfees.Staffcostscontinuedtobethelargestcomponentandkeygrowthdriveroftotalexpenses,withalowershareof49.7percentin2014comparedto50.3percentin2013.Thecost-to-incomeratioimprovedto52.7percentfrom54.8percentin2013.

Interest rate risk in the banking book

BankingbookinterestrateriskcontinuedtobeminimalforNamibianbankinginstitutions.Fromtheresultsofthebankingbook interestratesensitivitysimulationcarriedoutbythebanking institutions,a200basis-pointparalleldecreaseininterestratesovera12-monthhorizonwouldtriggeracorrespondingN$280.1milliondecreaseinthesector’scombinednet interest income.Inresponsetothesameshock,thesector’seconomicvalueofequity(EVE)wouldincreasebyN$46.1millionor,equivalently,0.48percentofcapitalfunds.Ontheotherhand,a200basis-pointincreaseininterestrateswillresultinequal,thoughoppositemovementsinearningsandEVE.

Foreign exchange risk

Thebankingsector’snetaggregatepositioninforeigncurrenciesremainedwellbelowtheregulatorylimit.Thenetaggregatepositionincreasedfrom0.8percentattheendof2013to3.6percentattheendof2014,remainingwellbelowthestatutorylimitof20percentofcapitalfunds(Figure18).Thisindicatesthatthebankingsectorhadrelativelylownetexposuretoforeignexchangerisk,thatis,theriskoflossesresultingfromadverse movements in foreign exchange rates.

Figure18:Netaggregateforeignexchangepositionasapercentageoftotalcapital


Capitalization

During 2014, the banking sector remained adequately capitalised,with all capital adequacy ratiosbeingwellabovetheircorrespondingregulatoryminima.TheTier1risk-weightedcapital ratio (RWCR)improvedto11.9percentfrom11.5percentattheendof2013,andsodidthetotalRWCRfrom14.4percentto14.7percent(Figure19).

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Figure19:BankingSectorCapitalRatios


Stress testing for capital adequacy

StresstestingwasundertakenwiththeobjectiveofassessingtheresilienceoftheNamibianbankingsectortopossibleinterestratehikes.ThestresstestfeaturedasituationwheretheSouthAfricanReserveBankandtheBankofNamibiaarecompelledtopursuetightmonetarypolicyinresponsetoapossiblegradualupwardnormalizationof interestratesintheUS.Thismonetarytighteningisexpectedtohavetheeffectofprompting banks to increase their prime lending rates, resulting in increased default rates and therefore higher NPLsacrosstheentireloanportfolio.

The exercise also considered the impact of the interest rate increases on net interest income stemming from maturitygapsbetweeninterest-earningassetsandinterest-bearingliabilities.

Thefollowingthreescenarioswerecoveredbythestresstest,withatimehorizonof12monthsfromthereferencedateofDecember2014:• Abaselinescenario,whichfeaturesa100basis-pointincreaseinnominalinterestrates;• Amoderatescenario,featuringa200basis-pointincreaseinnominalinterestrates;and• Aseverescenario,featuringa300basis-pointincreaseinnominalinterestrates.

BasedonfinancialdataasattheendofDecember2014,thestresstestingresultsindicatethatthebanking industryasawhole isadequatelycapitalised towithstand the impactofpossible interestrateincreases.Underall threestresstestingscenarios,thesector’spost-shockrisk-weightedcapitalratiowouldstillbewell-abovetheregulatoryminimumof10percent(Figure20).Underthebaselineandmoderatescenarios, the risk-weightedcapital ratio is in facthigherafterstress, largelybecauseprofitbuffersheavilyoffsettheincreaseinprovisionsstemmingfromtheincreasedNPLs.

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Figure20:Pre-andPost-ShockRisk-weightedCapitalRatio


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VIPerformanceoftheNon-BankingFinancialSector

Since the last FSR of March 2014, the balance sheets of non-banking financial institutions andintermediariesremainrobust,asmostofthemcontinuedtoexperiencedouble-digitgrowthduringtheyearof2014.Positivereturnsonassetsareexpectedduring2015andexcessassetsforfinancialinstitutionsandintermediariesareexpectedtocontinuegrowing.Pensionfunds,insurancecompaniesandmedicalaidfundsremainwellcapitalised,withfunding/solvencylevelsinexcessofthoserequiredintermsofthelaw.Inlinewithregulatoryrequirementsandtheriskappetiteof theirclients, investment institutionspredominantlyinvested their assetswithin theCMA.NBFI investments on the regional and international capitalmarketscontinuetobesignificantandshouldbemonitoredtoensurecompliancewithformal limitsoninternationalexposure.

Thenon-bankfinancialsectorplaysanimportantroleintheintermediationofsavingsandrisktransferofindividualsandcorporations.TheassetsofNBFIs,mostofwhicharemanagedbyinvestmentmanagersandcollectiveinvestmentschemes,constituted132.3percentofNamibia’snominalGDPandabout2.6timesthesizeofthemoneysupplyinNamibiaduringDecember2014(Table11).

Table11:NBFIassetsandrelativesize,December2014

(N$million)

CollectiveInvestment

Schemes InvestmentManagers Other/Direct Total %ofTotal

LongtermInsurance 1,926 20,523 17,775 40,224 20.9

ShortTermInsurance 157 428 4,164 4,749 2.4

MedicalAidFunds 49 455 656 1,160 0.6

PensionFunds 6,482 77,735 35,352 119,569 62.0

Companies 718 1,258 - 2,003 1.0

NaturalPersons 20,020 56 - 20,076 10.4

Others 1,196 3,880 - 5,076 2.6

Total 30,548 104,335 57,947 192,857 100.0

Measure N$Million % of measure

GDP 145,744 132.3

MoneySupply(M2) 75,520 255.4

Sources: NAMFISA (asset values); National Statistics Agency (GDP at market prices and M2). Hyphens (-) mean that no

data is available

Given that institutional investors (insurersandpension funds)holdasubstantial shareof thefixedincomesecuritiesmarketinNamibia,theiroperationswarrantconsistentmonitoring.Generally,pensionfundsandlong-terminsurerscontinuetoholdasignificantshareofassetsinvestedinNamibia’scapitalmarkets(Table12).

GrowthintotalassetsofNBFIswassignificantfortheyear2014onthebackofcontinuedincreasesmainly in assetgains,pensioncontributionsand investment income forpension funds, short- andlong-terminsurance.Agrowthof13.6percentwasobservedinthetotalassetsofpensionfundsattheendofDecember2014from22.8percentinthepreviousreportingperiod.Inthesamevein,growthintheasset


baseoflongterminsurerseasedto10.4percentduring2014,comparedto14.9percentin2013.Lookingahead,theoperationsofNBFIswillbemonitoredandrisksmanaged.

Table12:SizeofBalanceSheetsofNBFIs

Dec-11 Dec-12 Dec-13 Dec-14

AssetValues(N$million) Assets %ofGDP Assets %ofGDP Assets %ofGDP Assets %ofGDP

LongTermInsurance 26736 29.6 31654 29.6 36424 29.1 40224 27.6

ShortTermInsurance 2624 2.9 3001 2.8 3461 2.8 4749 3.3

MedicalAidFunds 768 0.9 858 0.8 1002 0.8 1160 0.8

PensionFunds 69478 77.1 85757 80.2 105267 84.3 119569 82.0

CIS 27526 30.5 32106 30.0 37267 29.8 42083 28.9

InvestmentManagement 91665 101.7 109110 102.1 123322 98.8 136186 93.4

Micro-lending 1051 1.1 1753 1.6 2616 2.1 3382 2.3

FinancialMarket:

-Local market capitalization 9304 10.3 11057 10.3 18729 15.0 22322 15.3

-Local debt issued 14644 16.2 17125 16.0 19077 15.2 21806 15.0

GDP(N$million) 90120 106895 124863 145744

Source: NAMFISA

Overall,assetgrowthoftheNBFIsectorremainshealthy.AsattheendDecember2014,theyear-on-yearassetgrowth(includingloansoutstandingformicro-lenders)forallNBFIswaspositiveandrangedbetween10.4percentforlongterminsuranceand37.2percentforshortterminsurance.Incomefrompremiumsforthe financial institutions (long-term insurance, short term insurance,pension fundsandmedical aid funds)increasedby18.0percenttoatotalofN$17.6billionfortheyear2014(Figure21).

Figure21:PremiumandContributionGrowthforNBFIs

Source: NAMFISA

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SincetheMarch2014FSR,thecapitalisationofNBFIswasadequatetoensuresolvencyandfundinglevelsinexcessofthoserequiredbystatute.Theselevelsaresufficienttowithstandtheriskstowhichtheseinstitutionsareexposed.Asisthenorm,asignificantproportionoftheliabilitiesofpensionfundsandlong-terminsurersarelinkedtoinvestmentperformance,andhence,capitalmarketvolatilityisbornebythememberorpolicyholder,anddoesnotposesolvencyproblems.Theonlyexceptionistwodefinedbenefitfunds,ofwhichthebiggest,theGovernmentInstitutionsPensionFund(GIPF),constitutesabout65percentofthetotalassetsshareofthepensionfundsandisguaranteedbytheGovernmentofNamibia.Short-terminsurersandmedicalaidfundsnormallysetasidecapitaltodealwithfinancialobligations,duetovolatilityofcapitalmarketsandclaims.

Over49percentof theassetsofNBFIsare invested in localfinancialmarkets,which includedual-listingsontheNSX.On average, collective investment schemes and investment managers invested about 48.6percentinNamibiaand39.3percentoftheirassetsinothercountrieswithintheCommonMonetaryArea(CMA),withtheremaining12.1percentinvestedinoffshoremarkets(Figure22).

Figure22:JurisdictionalAssetAllocationofCollectiveInvestmentSchemesandInvestmentManagers(Combined)

Source: NAMFISA (percentages may not add up due to rounding)

On theotherhand,pension funds invested40.6percentof theirassets inNamibia,27.4percent inothercountrieswithintheCMAand32.0percentoutsideoftheCMA(Figure23).GIPFinvestedabout37.0percentofitsassetslocallywhilealltheotherfundsinvested48.0percent.

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SincetheMarch2014FSR,theassetallocationofNBFIsendurestomimictheirliabilitystructureandriskappetite.Inthisregard,collectiveinvestmentschemesinvested58.9percentoftheirassetsinmoneymarket instruments,whichmatchtherisktoleranceoftheirmainclients,beingnaturalpersons.Investmentmanagersinvested49.4percentoftheassetsinequitiesand26.4percentinmoneymarketinstruments,astheirclientsarepredominantlypensionfundsandlong-terminsurers.Pensionfundsinvested58.4percentoftheirassetsinequitiesand15.8percentinfixedincomeinstruments,whichsuittheirliabilitiesstructure(Figure24).Thisassetallocationforequitiesisanticipatedtoimproveinthenextsixmonths. Figure24:AssetallocationofCollectiveInvestmentSchemes,InvestmentManagersandPensionFunds,December2014

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AlthoughthemarketcapitalisationofboththemainandlocalboardsoftheNSXincreasedin2014comparedto2013,capitalmarketgrowthremainedsubdued.The pension funds and long-term insurers exceededthedomesticassetrequirementbyatotalgapofN$7.2billion(Figure25).

Figure25:DomesticAssetRequirementofPensionFundsandLong-termInsurersversusAvailableLocalInvestments14

Source: NAMFISA

TheexposureofthebankingsectortoNBFIsislikelytocontinueandthecurrentsituationneedstobemonitoredclosely ina jointeffortbyBoNandNAMFISA.At thecurrent stageof financialmarketsdevelopment, the exposure of the banking sector to NBFIs is expected to increase. The domestic assetrequirementsforlongterminsurersandpensionfunds,coupledwiththerobustgrowthinNBFIsandthebiasofcollective investmentschemes tomoneymarket instrumentswill increaseNBFIs’ investment inbankingproducts and this warrants continuous monitoring.

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VIIPaymentInfrastructureandRegulatoryDevelopments

SincetheMarch2014FSR,thepaymentinfrastructurescontinuetooperateeffectivelyandefficiently.Progresshasbeenmadetoensurethatthereistransparencyinthewaythenationalpaymentsystem(NPS)isoperatedandtoreducetheassociatedrisks.Theoverseersparticipatedintheanalysisofcriticalincidentsthatmay impact thestabilityof theNPSand recommendedways toprevent such incidents in the future.Theseincludewaysofimprovingtheoperationalcontrolenvironmentofserviceprovidersandparticipants.Inaddition,theBankcontinuedwithitson-goingoff-sitemonitoringandoversightactivitiesaimedatidentifyingandresolvingofanyriskstothenationalpaymentsystemaspertheRiskBasedOversightPolicyFramework.The Bank sustained its efforts to obtain data from participants and service providers on a regular basis to identifyanyrisksthatneedtobeproactivelymanaged.

Duringthesecondsemesterof2014,growthinNISStransactionsincreasedbothintermsofvolumeand value compared to the sameperiod in 2013. The volume and value of payments settled inNISSincreasedby17.2percentand24.3percentrespectivelywhencomparedtothesameperiodin2013.NISStransaction volumesduring the secondhalf of 2014averaged4811 transactionspermonth,with a totaltransactionvalueofN$340.8billion.Theshareof real-time (typicallyhighvalue) transactionsprocessed inNISSwas61.6percentofthetotalvaluesettledinNISS,whilstretailpaymentsystems15represented39.4percent(Figure26).

Figure26:ValueofPaymentsProcessedinNISS


Settlement Windows

Since the last FSR, the likelihood of operational and settlement risks decreased slightly as theproportionofpayments(intermsofvalue)thatsettleinWindow3decreased.Settlementwindowperiodsforpaymentssettled in theNISS indicate thataround45.2 percent,orN$153.8 billion inpayments,wassettledinWindow1(08h00to12h00).Furthermore,20.9percent,orN$71.8billionwassettledinWindow2(12h00to15h00)and34.0percent,orN$115.1billion,inWindow3(15h00to16h40)(Figure27).Tominimizeoperationalandsettlementrisks,itisidealthatthemajorityofallsettlementtakeplaceintheearlierwindows,i.e.Windows1and2.Currently66.0percentofpaymentsaresettlinginWindows1and2,whichsignificantlyassists in mitigating operational and settlement risks, although some improvements can still be made.

15TheEFT,ChequeandCardsystems

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Disruptions to the Namibia Interbank Settlement System (NISS)

AnumberofdisruptionstoNISSwererecordedoverthesecondhalfof2014,butdidnotposeanymajorthreattofinancialstability.TheoverseerswerepromptlynotifiedofoperationalproblemsaffectingNISSandtheresolutionsthereof.TheNISSfront-end16 availabilityratiowas99.9percent,whichwasabovetheacceptableavailabilitylevelof99percent.Thesystemwasnotavailablefor1hour,mainlybecauseofatechnicalissuewiththewebinterface.Thenon-availabilityofthesystemwasofatemporarynatureandwasresolvedwithinthehourinwhichitwasdetected,posingnomajorthreattofinancialstability.Onedisasterrecoverytestwassuccessfullyconductedduringthesecondhalfof2014.

Security of Retail Payments

During theperiodunder review, thepaymentsystemsweremonitored,safeguardedandenhancedto maintain financial stability by observing the maximum fraud-to-turnover ratio of 0.05 percent.Asaproportionof thetotalamount transactedbyNamibiansusingcheques,EFTandpaymentcards (i.e.debit, cheque/hybrid, credit, etc.), fraud to sales losses increased to 0.00087 percent during the secondhalfof2014comparedto0.00076percent inthesecondhalfof2013.Thepayment industrycontinuestomonitor signs of emerging fraud trends and maintains collaborative efforts with enforcement agencies and consumerassociationstoavertfraudincidentsinvolvingretailpaymentsystems.Thishascontributedtoon-going enhancements to business practices to better protect consumers against new methods of perpetrating fraud.Asustainedconsumereducationprogrammehasalsohelpedtoincreasepublicawarenessonfraudprevention measures.

Future Developments in Payment and Settlement Systems

TheBankhasundertakentoobtainaccurateandup-to-dateinformationabouttherelativecostsofpaymentservicesinordertoachievetheobjectiveofcost-effectiveness,whileensuringthesmoothfunctioningofpaymentsystems.Theinformationonthecostsinvolvedintheprovisionofpaymentservicesis critical for ascertaining thecost-efficiencyof theNationalPaymentsSystem (NPS).As such,during thecourseof thesecondsemesterof2014,apaymentservicescostingmodelwasdevelopedbasedon theactivity-basedcosting(ABC)method,andtherolling-outprocesstotheindustryhascommencedin2015.

16ThisistheavailabilityofNISSfromacustomer/front-endperspective.

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VIIIConcludingRemarksandPolicyRecommendations

Duringtheperiodunderreview,theNamibianfinancialsystemwasrobust,despitesomeunfavorabledevelopmentsinboththedomesticandglobaleconomies.On the domestic front, an increase in both householdandcorporate indebtednesswasobserved inNamibiaduring theperiodunder review.Thekeyfactorsthatimpactedthestabilityoftheglobalfinancialsystemincludeddecliningcommodityprices,financialmarket volatility and the depreciation of the Namibia Dollar against the major trading currencies. It wasinitiallyanticipatedthatthesedevelopmentswouldadverselyaffectfinancialsystemstabilityinNamibia.Thisexpectationhoweverdidnotmaterialise,astheNamibianfinancialsystemremainedresilientinthesecondhalfof2014. Thecommercialbankinginstitutionsremainedstable,profitableandadequatelycapitalized. During the periodunderreview,assetqualityimprovedasdemonstratedbytheslightdecreaseintheNPLratio,whiletheprofitabilityindicatorsremainedhealthy.Thebankingsector’sliquidassetholdingsalsoremainedadequateinrelationtostatutoryrequirements,whilecapitalratiosremainedhighandresilienttoforeseeablestressevents.Notwithstanding the aforementioned observations, the concentration of banking sector assets in mortgages remains a concern.

Thebalancesheetsofnon-bankingfinancialintermediariesarestrongbutrequiremonitoringduetotheirlinkagestothedomestic,regionalandforeigncapitalmarkets.Consolidatedindustrystatisticsonassets, liabilities, surpluses and reserves for insurance companies, medical aid funds and pension funds still reflectthattheseentitiesarefinanciallystable.Moreover,accordingtothecomparativelevelsofcontributionsreceived,claimspaidandexpensesatindustrylevel,therewerenomajorriskfactorsidentifiedtobeimmediatethreatsto liquidity.Onthedomestic front, investorsreport thatthe lackofavailabilityofdomesticassets inwhich to invest remains a concern.

Paymentsysteminfrastructurescontinuedtooperateeffectivelyandefficiently.Inthisregard,progresswasmadetoensuretransparencyinthewaythenationalpaymentsystem(NPS)isoperatedandtoreducetheassociated risks.Specifically,ananalysisofcritical incidents thatcould impact thestabilityof theNPSwasperformed,andwaystopreventsuchincidentsinthefuturewererecommended,includingtechniquestoimprove operational controls.

Policy Actions

Privatesectordebt

• Overall,householdindebtednesscontinuestobehigh,andthiswillrequireclosemonitoringgoingforward.

BankingSector

• Regularandintensiveworkonstresstestingshouldcontinuewithaviewtocontinuouslyassessbankingsectorresiliencetoforeseeablerisksandvulnerabilities.Theintroductionofloan-to-value(LTV)limitsasamacro-prudentialtoolisunderwayandremainsanappropriatemeasureforaddressingtheexposureriskofthe banking sector to the mortgage market.


Non-BankingFinancialSector

• In line with the Financial Sector Strategy, concerted efforts should continuously be undertaken andimplementedtodevelopthedomesticcapitalmarketsoastokeepupwiththerobustgrowthofNBFIassets.Thisstrategywillhelptolimitthecontagionriskfromglobalfinancialmarkets.TheideaistoencouragetheNBFIstoinvestmoreoftheirassetslocallyandtherebyreducetheirforeignriskexposure.

• SinceNBFIsprovideasourceofliquiditytocommercialbankinginstitutions,careshouldbetakentoensurethatpotentialdownsideexposureofNBFIstothebankingsectorismonitoredandevaluatedregularly.

• Extendingtheyieldcurveon long-datedsecuritiescouldassist indeepeningcapitalmarketsandcreateinvestmentopportunities forNBFIs. Itcanalsoactasa leading indicator to theprivatesector regardingissuance of long-term debt.

• Developinga robustmeasurement frameworkonfinancial stability indicators forNBFIswill enhance theabilityofthecountry’sfinancialsystemtowithstandpotentialshocks

Paymentinfrastructureandregulatorydevelopments

• Tocombatfraudsuchasforgedorcounterfeitedcards,theindustryhasembarkedonaEuropay-MasterCard-Visa(EMV)complianceprojectforvariouscardsusedintheNPS.This internationalstandardwill requirecardstohavea“chip”insteadofa“magstripe”forauthenticatingcardtransactions,makingitmuchmoredifficultforthesecardstobecloned.Theindustryisexpectedtohavealldebit,creditandhybridcardsEMV-compliantby30September2015.

• During2015,allstakeholdersintheNPSwillparticipateinthereviewofNationalPaymentSystemVision2015.Thereviewwillassesswhetherthekeystrategiesthatwereoutlinedin2010wereachievedandarestillrelevantwithaviewtocraftanewVisionfor2020.


Appendices

Appendix 1: Financial Soundness Indicators

Table1:FinancialSoundnessIndicators

Jun-13 Dec-13 Jun-14 Dec-14

Number of banking institutions 6 6 7 7

Totalassetsofbankinginstitutions(N$million) 70929 76989 80896 87169

Assets/GDP 77.9 79.3 85.8 87.0

Capitaladequacyratios(%)

Tier1leverageratio 8.0 8.5 8.9 8.9

Tier1RWCR 10.7 11.5 12.3 11.9

TotalRWCR 14.4 14.4 15.2 14.7

Assetqualityratios(%)

NPLs/Grossloans 1.5 1.3 1.5 1.2

Overdueloans/Totalloans 7.3 4.1 3.6 3.4

Totalprovisions/Totalloans 1.3 1.2 1.2 1.2

Totalprovisions/NPLs 86.6 92.8 69.5 82.3

Specificprovisions/NPLs 28.6 29.5 29.1 31.3

Profitabilityratios(%)

Returnonassets 2.1 2.4 2.2 2.4

Returnonequity 22.0 24.0 21.9 24.0

Net interest margin 5.4 5.6 5.6 5.9

Cost-to-income ratio 56.9 54.8 53.4 52.7

Liquidityratios(%)

Liquidassetstototalassets 10.1 10.7 10.5 11.5

Grossloans/Totaldeposits 91.0 90.8 93.3 94.4

Grossloans/Grossassets 75.4 74.8 76.0 77.1

Liquidityratio 11.1 11.7 11.8 12.5



Appendix 2: Performance of the Non-Banking Financial Sector1

Long-termInsuranceTable2:IndustryIncomeandExpenses

1Therewerechangesinthereportingformatintroducedin2014.Thishasresultedinnewdatafieldsbeingintroduced,andthus

datapointsdonotexistforprioryears.Thesemissingdatapointsaredenotedbyahyphen(-).

(N$000)

2010 2011 2012 2013 2014

PREMIUMINCOME

Singlepremiums 1941764 2115584 2597266 2,657119 2681468

Recurringpremiums 2520101 2837694 3212438 3731081 4751746

Grosspremium 4461865 4953278 5809704 6388200 7433214

Less:Reinsurancepremium 38516 61970 56600 101293 170231

NetPremiumwritten 4423349 4891308 5753104 6286907 7262983

Grosspolicyholderbenefitspaid 3620903 3590179 3937090 4454130 4999082

Less:reinsurancerecoveries - - - - 71782

NetPolicyholderbenefits 3620903 3590179 3937090 4454130 4927300

Changeinpolicyholderliabilities

1312797

Commission 299639 330783 370905 440871 522703

PolicyholderBenefitsandCommission 3920542 3920962 4307995 4895001 6762800

GrossProfit/Loss 502807 970346 1445109 1391906 500183

Total other income 2565845 1513136 4088219 4887215 3943922

InvestmentIncome 2400167 1409869 3803984 4337370 3790416

Other income 165678 103267 284235 549845 153506

Total other expenses 605596 660084 683577 847763 526555

Managementexpenses 595941 656077 683863 846599 420725

Financecosts - - - - 716

Other expenses 9655 4007 -286 1164 105114

Profit/(loss)beforetaxation 2463056 1823398 4849751 5431358 3917550


Table3:IndustryBalanceSheet

(N$000)

2010 2011 2012 2013 2014

ASSETS

Immovableproperty - - - - 455341

Property,plantandequipment 496208 531730 543237 384676 24169

Intangibleassets - - - - 279813

Deferred tax - - - - 44

Other assets 211400 3176 2545 218886 3319555

Investments 18415484 21180727 25601521 28205274 26346262

NON-CURRENTASSETS 19123092 21715633 26147303 28808836 30425184

ReinsurerDebtors - - - - 152165

PremiumDebtors 717760 1004863 1160791 1160819 254637

TECHNICALASSETS 717760 1004863 1160791 1160819 406802

Cash&Cashequivalents 5298283 3758023 4043090 6114550 3021720

Receivables 229832 257411 302640 339551 835902

Investments - 5534841

CURRENTASSETS 5528115 4015434 4345730 6454101 9392463

TOTALASSETS 25368967 26735930 31653824 36423756 40224449

Deferred taxation - - - - 274

Other liabilities 625296 893392 924998 1158579 175863

NON-CURRENTLIABILITIES 625296 893392 924998 1158579 176137

Policyholderliabilities 21696289 22999539 27127614 30937929 33943523

Reinsurancecreditors - - - - 60548

TECHNICALLIABILITIES 21696289 22999539 27127614 30937929 34004071

Trade&otherpayables - - - - 826340

Current income taxation - - - - 5553

CAR 421059 484957 628724 648783 226172

Other liabilities - - - - 335747

CURRENTLIABILITIES 421059 484957 628724 648783 1393812

TOTALLIABILITIES 22742644 24377888 28681336 32745291 35574020

EXCESSASSETS 2626323 2358042 2972488 3678465 4650429


Short-termInsuranceTable4:IndustryIncomeandExpenses

(N$000)

2010 2011 2012 2013 2014

Gross premiums written 2028562 2138593 2444369 2788152 3338281

Net reinsurance expense 537281 972235 748665 833078 1054454

Netpremiumswritten 1491281 1166358 1695704 1955074 2283827

ChangeinprovisionforUPR -

-

-

- 42623

NetPremiumsearned 1503262 1548639 1702227 1936713 2214532

Gross claims and loss adjustment expenses -

-

-

- 662172

ChangeinIBNR -

-

-

- 8590

Less:Grossclaimsandlossadjustmentexpenses recovered from reinsurers

-

-

-

- 112713

NetClaimsincurred 941431 959265 1027977 1204758 1324230

Commission incurred -

-

-

- 199964

Less:Commissionearned -

-

-

- 90106

Netcommissionincurred 164616 169675 182582 251844 233532

CLAIMSANDCOMMISSION 1106047 1128939 1210559 1456602 1557762

Underwritingsurplus 397216 419700 491668 480111 656770

Managementexpenses 239087 241846 313805 340457 459232

Financecosts -

-

-

- 657

Investmentincome 120331 146269 138690 136775 192621

Other income 13014 -42498 6598 42848 176214

OtherExpenses -

-

-

-

-

Profitbeforetax 291474 281625 323151 319277 565716

LESS:Est.taxation(Current+def.) -

- 73460 78136 98995

PROFITFORTHEYEAR 291474 281625 249691 241141 466721

Othercomprehensiveincomefortheyear -

-

-

- -22328

TOTALCOMPREHENSIVEINCOMEFORTHEYEAR 291474 281625 249691 241141 444393

Performanceratios 2010 2011 2012 2013 2014

Cession ratio 26.0% 45.0% 31.0% 30.0% 32.0%

Net loss ratio 63.0% 62.0% 60.0% 62.0% 59.0%

Underwritingexpenseratio 27.0% 27.0% 29.0% 31.0% 32.0%

Net combined ratio 89.0% 89.0% 90.0% 93.0% 91.0%



(N$000)

2010 2011 2012 2013 2014

NON-CURRENTASSETS 1051894 1319354 1314563 1506834 1251240

Immovableproperty 17293 17565 3462 1126 1756

Property,plantandequipment 41338 15168 15790 25439 13507

Intangibleassets - - - - 13582

Deferred tax - - - - 11172

Other assets 342019 351899 352141 330447 231801

Investments 651243 934722 943170 1149822 979422

TECHNICALASSETS 79382 147514 101566 214096 900333

Reinsurers’shareofunearnedpremiums - - - - 494145

Reinsurers’shareofoutstandingclaims - 16048 1975 4325 87312Reinsurers’shareofclaimsincurredbutnot reported - - -

- 60356

CommissionReceivable - - - - 26367

Premiumdebtors 79382 131466 99591 209771 232153

CURRENTASSETS 1226142 1156764 1585830 1740550 2597529

Cashandcashequivalents 963426 1008995 1303354 1433726 1343310

OtherReceivables 262716 147769 282476 306824 129765

Investments - - - - 1124454

TOTALASSETS 2357418 2623632 3001959 3461480 4749102

CAPITALANDRESERVES 903533 947177 931238 1082043 1353146

Ordinarysharecapital 47551 47551 47551 47551 47551

Sharepremium 100774 100774 100774 100774 100774

Retainedearnings 634821 658810 619615 757384 984472

Contingencyreserve 120387 140042 163298 176334 218692

Other reserve - - - - 1657

NONCURRENTLIABILITIES 23680 25707 25650 27581 61984

Deferred taxation 23680 25707 25650 27581 44577

Other liabilities - - - - 17407

TECHNICALLIABILITIES 1126056 1272552 1460025 1647925 2705717

Gross provision for unearned premiums 849370 999052 1096849 1257478 1654638

Gross outstanding claims 165847 173676 199034 206092 588575

Gross claims incurred but not reported 86743 82743 125380 117833 203588

Commission Due - - - - 30817

Reinsurancecreditors 24096 17081 38762 66522 228099

CURRENTLIABILITIES 304150 378196 585046 703931 628255

Tradeandotherpayables 157865 168922 270996 348146 214731

Current income taxation -647 26123 13022 5202 4621

Other liabilities 146931 183151 301028 350583 408903

TOTALEQUITYANDLIABILITIES 2357418 2623632 3001959 3461480 4749102

SolvencyRatio 33.2% 30.8% 25.6% 26.2% 28.0%


Medical Aid FundsTable6:IndustryIncomeandExpenses

(N$000)

2010 2011 2012 2013 2014

Contributions received 1576928 1757893 2002120 2315575 2642485

Less:SavingsPlanContributions 87206 69443 76393 83552 89611

Less:Reinsurance 29273 24108 12009 20245 20142

Netcontributions 1460449 1664342 1913718 2211778 2532732

Claims 1215848 1440207 1707675 1962359 2194981

Administrationcosts 121370 135537 161447 187831 196224

Operational expenses 29379 34013 33814 38016 47624

ManagedCare:ManagementServices 20888 21892 31122 35619 39927

Consultantfees/professionalfees 0 3742 5038 4033 3964

Underwritingsurplus 72964 28951 -25378 -16080 50012

Other income 6000 2365 13664 29684 12402

Investmentincome 47281 45326 72325 95526 82556

NetSurplus 126245 76642 60611 109130 144971

Table7:Industrybalancesheet

(N$000)

2010 2011 2012 2013 2014

ASSETS Non-currentAssets 517718 586272 715938 819397 924839

Property,Plant&Equipment 4076 8707 11747 11736 11687

Investments 513642 577565 704191 807661 913152

Currentassets 156203 181736 142335 182598 237068

Accountsreceivable 37797 30146 47676 34768 26144

Cash&cashequivalents 118406 151590 94659 147830 210923

TotalAssets 673922 768009 858273 1001995 1161907

FUNDSANDLIABILITIES

Members'Funds 519151 615940 660968 759829 897689

Accumulatedfunds 514183 615940 660968 759829 897689

Revaluationreserve-investments 4968 0 0 0 0

Currentliabilities 154771 152069 197305 242166 264217

Accountspayable(creditors) 27089 71720 49671 77032 75629

Provisionforoutstandingclaims/IBNR 120844 65412 125234 139508 158506

Bank overdraft -

Savingsplanliability(otherliabilities) 6838 14840 19801 23372 28336

Provisionforbaddebt 0 97 2599 2254 1747

TotalFundsandLiabilities 673922 768009 858273 1001995 1161907


Pension FundsTable8:IndustryIncomeandExpenses

(N$million)

2010 2011 2012 2013 2014

ContributionsReceived 2942 3109 3874 4414 5627

NetInvestmentIncome 4561 4857 11143 13288 9143

CapitalAppreciation 845 582 866 2298 1443

OtherIncome 38 39 37 11 22

InsuranceProceeds 68 81 92 93 128

Totalincome 8454 8668 16012 20104 16363

AdminFees 131 147 161 262 242

InvestmentFees 140 139 140 215 280

InsurancePremiums 177 181 206 223 258

OtherExpenses 98 103 98 45 149

Totalexpenses 546 570 605 745 929

- - - -

NetIncomeBeforeTransfersandBenefits 7908 8098 15407 19359 15435

- - - -

Net Transfers -135 -374 -377 -288 -472

BenefitsPaid 2720 2704 3257 3885 4855

NetTransfersandbenefitspaid 2585 2330 2880 3597 4383

NetIncomeAfterTransfersandBenefits 5323 5768 12527 15762 11052


(N$million)

2010 2011 2012 2013 2014

Non-currentAssets 62960 68306 84434 103997 118044

Current assets 943 1172 1323 1270 1525

Totalassets 63903 69478 85757 105267 119569

AccumulatedFundsandReserves 62696 68365 84659 103886 116980

Current liabilities 1207 1113 1098 1381 2589

TotalFundsandLiabilities 63903 69478 85757 105267 119569


(N$million)

2010 2011 2012 2013 2014

Countryallocation

Namibia 12763 15123 16771 18742 19880

CommonMonetaryArea 12882 11838 14301 16559 18409

Offshore 346 565 1034 1966 3794

Total 25991 27526 32106 37267 42083

Assetallocation

Moneymarketinvestments: 22182 23152 24658 21395 24799

Treasury bills 325 2 034 1 797 1 454 751

Negotiable certificates of deposit 7 091 7 851 9 806 9 310 10 632

Banker's acceptances 0 0 0 0 0

Debentures 0 0 0 0 28

Notice, call and other deposits 10 470 5 563 4 855 5 594 8 787

Other 4 296 7 704 8 200 5 037 4 601

Listedequity 1621 2228 3602 9179 9844

Listed debt 1394 1503 2981 3658 4266

Unlistedequity 208 213 187 1704 1515

Unlisteddebt 0 161 231 574 548

Unlistedproperty 0 0 0 0 0

Other assets 586 269 447 757 1111

TotalFundsUnderManagement 25991 27526 32106 37267 42083

Collective Investment SchemesTable10:Totalfundsundermanagement


(N$million)

2010 2011 2012 2013 2014

Pensionfunds 1281 1230 1511 2388 6482

Short-terminsurancecompanies 67 146 198 182 157

Long-term insurance companies 687 723 1101 1259 1926

Medicalaidfunds 35 9 46 49 49

Unittrustschemes 2743 2819 4129 4517 5073

Companies 6639 5418 5413 8292 7180

Natural persons 13708 16044 17817 19096 20020

Other 831 1137 1891 1484 1196

Total 25991 27526 32106 37267 42083

Table11:SourceofFunds

Investment Management (IM)Table12:TotalFundsUnderManagement

(N$million)

2010 2011 2012 2013 2014

Countryallocation

Namibia 45509 46386 55086 58571 66682

CommonMonetaryArea 32148 35061 41707 48467 51725

Offshore 8397 10218 12317 16284 17779

Total 86055 91665 109110 123322 136186

Assetallocation

Moneymarketinvestments 30356 30331 34006 35280 35963

Treasury bills 9 966 12 269 13 817 15 180 14 836

Negotiable certificates of deposit 5 244 3 702 4 522 4 396 6 128

Banker's acceptances 0 0 0 0 0

Debentures 0 4 0 0 28

Notice, call and other deposits 11 348 11 495 11 519 11 096 10 867

Other 3 798 2 861 4 148 4 608 4 104

Listedequity 36650 42553 53101 58027 67233

Listed debt 11125 13363 15540 17552 19211

Unlistedequity 636 905 1168 1152 1685

Unlisteddebt 49 171 241 255 94

Unlistedproperty 322 372 376 650 685

Other assets 6918 3970 4678 10406 11315

TotalFundsUnderManagement 86055 91665 109110 123322 136186


(N$million)

2010 2011 2012 2013 2014

Pensionfunds 47574 50977 62400 71551 77735

Short-terminsurancecompanies 686 783 770 373 428

Long-term insurance companies 12822 13757 16133 18796 20523

Medicalaidfunds 288 321 320 320 455

Unittrustschemes 22333 22878 26183 28409 31824

Companies 406 532 524 808 1285

Natural persons 5 9 25 46 56

Other 1941 2408 2754 3019 3880

Total 86055 91665 109110 123322 136186

Table13:SourceofFunds

2010 2011 2012 2013 2014

Loansoutstanding(N$000)

TotalLoansOutstanding 1118003 1501208 1752556 2616092 3382060

Term lenders 1059095 1439594 1685290 2538299 3302017

Paydaylenders 58908 61614 67266 77793 80043

LoansDisbursed(N$000)

TotalLoans 1094327 1483754 1586460 2261550 2259908

Term lenders 606992 956645 1079030 1640765 1551699

Paydaylenders 487335 527109 507430 620785 708209

NumberofLoans

TotalLoans 638132 656061 613307 698460 717031

Term lenders 79265 96397 97486 114796 100104

Paydaylenders 558867 559664 515821 583664 616927

AverageLoanAmounts(N$)

Total 8530 10866 12053 15357 16649

Term lenders 7658 9924 11069 14293 15501

Paydaylenders 872 942 984 1064 1148

Micro-lending Table14:CreditXtension

namibia financial stability report - namfisa

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