Despite the numerous problems being experienced in the global financial system, the domestic financial system continues to be characterised by robust financial institutions, banks in particular, stable financial markets and resilient infrastructure, Bank of Namibia assistant governor Ipumbu Shiimi said this week when the bank released the State of the Namibian Financial Industry. Shiimi said the banking environment in Namibia continued to be characterised by favourable conditions, contributing to the positive performance.

He observed that in the second half of 2007, bank profit grew, interest margins expanded steadily, and capital buffers rose above regulatory minima.
“Profitability and capitalisation level should enhance the safety and soundness of the banks and strengthen the stability of the sector. Although NPL ratio is declining, there is potential for this trend to reverse if interest rates increase further. It is therefore important to continue keeping a close watch on this ratio,” he said.
Shiimi said in the housing market, high levels of interest rates resulted in stagnant house prices in some areas and falling prices in others.
“Further rate increases, therefore, could result in more declines in house prices and financial losses to banks. These risks, however, do not appear to pose any serious risk of financial system instability,” he said.
Shiimi said, despite the less favourable financial conditions in the global markets, particularly in the US, Namibia’s financial system continued to be robust and sound. He said banks were well capitalised, with sufficient liquidity and declining non-performance loans.
“Downside risks, going forward, include the slowing global economy with its concomitant adverse effects on Namibia’s economic growth and consequently low income for banks. Further high oil and food prices could fuel domestic inflationary pressures, which could trigger interest rates increases and possibly high non-performing loans for the banking industry. However, these downside risks notwithstanding, the outlook for the financial sector in Namibia is under no foreseeable threat that could obstruct its competence,” he said.