BoN orders loan relief for farmers hit by FMD and drought risks

The Bank of Namibia (BoN) has directed commercial banks to grant repayment moratoriums of up to 24 months to farmers and businesses in the agricultural value chain affected by the foot-and-mouth disease (FMD) outbreak and El Niño-induced adverse weather conditions.

Under a new determination, BID-42, banks must provide affected borrowers with loan repayment holidays ranging from one to 24 months, depending on their financial circumstances, ability to repay and the impact of the disruptions on their income.

The measure follows concerns raised during engagements between the agricultural and banking sectors about the financial pressure facing farmers and related businesses.

The determination also allows banks to restructure existing loans to make repayments more manageable. Interest will continue to accrue at the agreed contractual rate unless the bank and borrower agree otherwise in writing.

Affected borrowers may also apply for additional credit facilities, subject to an assessment of their repayment capacity and risk profile.

The relief is available to farmers and other agricultural clients who can demonstrate that their income has been adversely affected by FMD or unfavourable climatic conditions. It also covers businesses operating directly or indirectly in the agricultural value chain, as well as companies in other sectors whose income, operations or cash flow depend substantially on agricultural activity.

Supporting viability

The BoN said the intervention was intended to support the viability of the agricultural sector, protect livelihoods and limit risks to the wider financial system.

Banks must provide written reasons for declining applications for relief. Clients dissatisfied with how their applications are handled may use the bank's complaints process or other applicable dispute-resolution mechanisms.

Under the determination, borrowers granted relief will continue to be reported as performing to credit bureaux for the duration of the moratorium, rather than being classified as non-performing.

However, this provision is subject to an exception under the central bank's BID-2 requirements where there is a material deterioration in credit quality.

The central bank said the measure recognised agriculture's contribution to employment, food security and economic growth. It is intended to give affected businesses greater financial flexibility as they navigate the effects of the disease outbreak and adverse weather conditions.