Agribank faces liquidation squeeze - Iyambo
THE Agricultural Bank of Namibia (Agribank) continues to face a liquidation squeeze for various reasons. These include the limited fiscal allocation from national treasury and poor rainfall, which limited the level of loan repayments from clients, Agribank chairperson Michael Iyambo has cautioned.
However, Iyambo said the bank will continue to implement initiatives to enhance its customers focus, ensure financial sustainability, attract, develop and retain competent employees as well as contribute to the transformation of the economy through financial inclusion.
Iyambo said this in the bank’s annual report recently submitted to parliament.
“The financial performance of the bank is a function of the economic conditions and environmental factors, which have a far-reaching impact on the sector financed by the bank, and consumers ability to repay,” he said.
He said despite the difficult operating environment, the bank delivered a solid set of financial results. “The bank’s performance continued on a positive trajectory,” Iyambo said, adding that new business growth, cost containment and managing bad debt provision by ensuring sufficient collateral cover for loans granted was some of the key drivers of positive performance in 2019.
He said the 2018/19 financial year marked the third year of implementing the new five-year business strategy.
“Strategic focus has been placed on improving the quality of the loan portfolio, reducing non-performing loan and driving loan book growth,” said Iyambo.
He stated that among the notable achievements in various constituents of the business strategy include strengthening the executive team with the appointment of key staff in the credit and human resources and financial departments.
Also, he said, others include the implementation of the Emerging Retail Financial Product (ERFP) to cater for full-time communal farmers without collateral to access financing as part of efforts to widen financial inclusion.
“We have also implemented leadership development interventions, which involves a six-month training programme for middle and senior managers, to enhance leadership and management capacity,” he explained.
Meanwhile, according to the banks financial report, loans and advances to consumers grew 15% from N$2. 43 billion in 2018 to N$2.8 billion in 2019, largely on account of new business growth.
Similarly, disbursements have increased by 22% from N$358 million in 2018 to N$438 million in 2019.
“Interest income grew 14.5% from N$189 million in 2018 to N$216.4 million in 2019, on the back of new business growth. The good growth in interest income continued a positive growth trajectory over the past three years,” the report reads.
According to the report, interest expenses increased by 42% from N$21.5 million in 2018 to N$30.6 million in 2019, on the back of increased borrowing to fund loan book growth.
Credit impairment losses were N$10 million in 2019 compared to N$23.8 million in 2018, as a result of increased efforts to ensue enough collateral cover for loan accounts in arrears and maintaining the collection rate.
Also, total expenses increased by only 4.4% from N$130.9 million in 2018 to N$136.7 million in 2019.
“The moderate rise in the expense growth is due to deliberate rise cost containment efforts by the bank,” the report stated.
The decelerating expense growth rate continues a downward trajectory over the past three years, in line with the bank’s strategy of prudent cost management.
According to the document, the surplus for the year increased by 87% from N$30 million in 2018 to N$56 million in 2019.
Whilst the bank’s focus is not to make excessive profit given its developmental mandate, it is important that it remains sustainable and delivers consistent returns on equity, it is stated.
Similarly, the bank says it has attained satisfactory surplus levels over the years.
“Total assets surpassed the N$3 billion mark for the first time, while net asset value increased by 6.1% from N$2.5 billion in 2018 to N$2.44 billion in 2019.” –