BoN investigates vehicle loans

THE Bank of Namibia (BoN) is investigating whether commercial banks are offering new vehicle loans in accordance with the law.BoN Deputy Governor, Paul Hartmann said the central bank was concerned about the way several banking institutions were offering attractive incentives to clients entering into instalment sales agreement for the funding of new cars, and would investigate if these practices were in accordance with the Credit Agreements Act of 1980.

Some of the incentives under scrutiny would be the zero per cent deposit scheme, delayed repayments, inclusion of service plans and insurance, Hartman said while delivery the last monetary policy statement for 2005 at a press conference in Windhoek on Thursday. “The bank’s (BoN) concern is that these incentives may increase total household debt, which could have serious repercussions for consumers in the event that interest rates rise in the future.Furthermore, it could precipitate the allocation of credit for consumption instead of on investment, and subsequently put unnecessary pressure on the country’s balance of payments,” said Hartmann.On the real economy, Hartmann said taking into account the monetary and economic developments, both locally and externally, the central bank had decided to maintain its repo rate unchanged once again at seven per cent.He, however, said the initial real gross domestic product (GDP) figures for the third quarter of the year seemed to suggest that the economy experienced a decline.The decrease was attributed to the fall in output of the mining, manufacturing, wholesale and retail trade, hotels and restaurant and fishing sectors.The sluggish performance of the economy was also reflected in the country’s balance of payments.”During the third quarter, merchandise exports are estimated to have fallen by 16,7 per cent to N$2,7 billion, quarter-on-quarter, from those in the preceding quarter,” said Hartmann.Inflation has for the year remained relatively low, boosting consumer purchasing power, and indicating to GDP growth.Hartmann said the short-term inflation outlook remains positive, and what could threaten the situation would be the volatile oil prices and rising food prices.Said Hartmann: “The Bank of Namibia would like to urge the business community and exporters to take advantage of the prevailing low interest rates as well as improved competitiveness by increasing output and exports.””The bank’s (BoN) concern is that these incentives may increase total household debt, which could have serious repercussions for consumers in the event that interest rates rise in the future.Furthermore, it could precipitate the allocation of credit for consumption instead of on investment, and subsequently put unnecessary pressure on the country’s balance of payments,” said Hartmann. On the real economy, Hartmann said taking into account the monetary and economic developments, both locally and externally, the central bank had decided to maintain its repo rate unchanged once again at seven per cent.He, however, said the initial real gross domestic product (GDP) figures for the third quarter of the year seemed to suggest that the economy experienced a decline.The decrease was attributed to the fall in output of the mining, manufacturing, wholesale and retail trade, hotels and restaurant and fishing sectors.The sluggish performance of the economy was also reflected in the country’s balance of payments.”During the third quarter, merchandise exports are estimated to have fallen by 16,7 per cent to N$2,7 billion, quarter-on-quarter, from those in the preceding quarter,” said Hartmann.Inflation has for the year remained relatively low, boosting consumer purchasing power, and indicating to GDP growth.Hartmann said the short-term inflation outlook remains positive, and what could threaten the situation would be the volatile oil prices and rising food prices.Said Hartmann: “The Bank of Namibia would like to urge the business community and exporters to take advantage of the prevailing low interest rates as well as improved competitiveness by increasing output and exports.”