Investors withdrawing funds in local markets
MBABANE – The Financial Services Regulatory Authority (FSRA) has reported that NBFI assets declined by E100 million.
They said this decline was a result of the withdrawal of funds from the local capital markets by institutional investors to fund other capital and infrastructure projects.
In their statistical bulletin on the non-banking sector, FSRA reported that a decline was observed in the value of non- bank financial institutions (NBFI) assets during the quarter under review, as the total NBFI assets declined from E90.9 billion to E90.8 billion as of September 30, 2022.
The total value of assets under management and advisory was E31.9 billion, a decrease of 6.2 per cent from the quarter that ended June 30, 2022.
Withdrawals
“As highlighted above, institutional withdrawals and retail withdrawals to augment disposable income continue to be observed as inflation continues to be heightened.”
Rising interest rates are also affecting the market values of other investments,” mentioned FSRA.
FSRA said this decline was mainly due to the 35 per cent decline in investment income as a result of unrealised fair value losses on financial assets and rental income, which declined by 34 per cent. In respect of contributions, a year-on-year increase of 6.9 per cent was observed.
On the expenditure side, a 17 per cent increase was observed, and this was mainly due to an 11 per cent increase in lump sum payments and a six per cent increase in periodic payments.
They said the growth in benefits paid during the first quarter of 2022 reflected the continued economic pressures on entities and individuals, which contributed to the cancellation of retirement fund benefits for employees.
Payment
Increases in periodic payments were mainly driven by the payment of periodic retirement fund benefits, which could be the result of cost-of-living adjustments (COLA) through pension increases for pensioners. The figure below illustrates the sector’s income and expenditure. Compared with the same date in 2021, membership increased by 10 per cent and this has been the case throughout the year.
“Although the retirement fund coverage is still considered low and concentrated among the formal sector employees, this increase is a step in the right direction for improving the coverage objective of retirement funds,” said the FSRA. Participation in retirement fund
QUOTE: “There’s nothing wrong with staying small. You can do big things with a small team.” — Jason Fried savings continues to be dominated by males, with more males in the active phase of the retirement savings (accumulation phase) and more females in the pension phase (withdrawal phase) as they earn the surviving spouses’ pension.
The regulator said the gender gap, however, increased by three per cent which is against the policy of increasing female participation in financial services.
In Eswatini, NBFI are regulated and managed by FSRA, whose purpose is to also supervise financial services to protect stakeholders and foster a stable financial system in the country.
Review
In the previous bulletin, FSRA reported that a two per cent decline in assets was observed in the NBFI sector, as they declined from E95.3 billion as of December 31, 2021, to E93.1 billion during the quarter under review. They said the decline was due to the overall asset decline in retirement fund assets, which were over a quarter of the non-banking financial sector assets.
As of March 31, 2022, the total value of assets under advisory and management in the capital markets sector was valued at E31.9 billion; this is a one per cent decline when compared with the E32.4 billion recorded at the end of Q4 2021.
FSRA said the decline was attributed to sluggish economic conditions and withdrawal of funds following the closure of one collective investment scheme.
FSRA said the number of collective investment schemes declined from six to five following the closure of the Sanlam Collective Investment Scheme, so there were now 26 licenced entities.
Under credit and savings institutions, a 0.6 per cent decline in assets was observed when compared to Q4 2021. FSRA said this decline was mainly due to the asset declines across the various sub-sectors except for Savings and Credit Cooperatives Societies’ (SACCOs) assets, which increased by 0.03 per cent.
The regulator said SACCOs (non-performing loans) (NPL) also showed a decline of eight per cent when compared to the other quarters, and building societies also showed a decreasing trend in the NPLs across the quarters and showed a three per cent decline on a quarter-on-quarter basis.
Increase
A three per cent year-on-year increase in Gross written premiums (GWP) for long term loans (LTIs) was observed and a similar increase was also observed in the sub-sectors assets.
FSRA said an improvement in net claims on policies was observed when compared to Q1 2021.
This rebound was due to the significant declines in funeral claims and credit life claims. The LTI remained solvent with a net equity position of E536.6 million.
A 25 per cent year-on-year increase in the short term loans (STI) gross written premiums was observed.
An improvement in GWP was observed across all classes of business except for motor and workmen’s compensation, which declined.
As of March 31, 2022, net claims on STI policies showed a 171 per cent increase when compared to the same quarter of 2021.
FRSA said a decline in claims incurred for all the STI classes of business was observed except for liability insurance and workmen’s compensation, which experienced significant net claims incurred increases above 100 per cent and property claims increases of 26 per cent.