BoN extends FMD-Related Loan Relief To Businesses Linked To Agriculture

By: Staff Reporter

Businesses beyond primary farming operations could qualify for loan repayment relief under a new Bank of Namibia determination aimed at cushioning the financial impact of Foot-and-Mouth Disease (FMD) and El Niño-induced climatic conditions.

This follows after the Bank of Namibia (BoN) on Friday has issued the Determination on Policy Changes in Response to Economic and Financial Stability Challenges as a Result of the Foot-and-Mouth Disease Outbreak and El Niño-Induced Climatic Conditions Related Risks to the Agricultural Sector in Namibia (BID-42).

The determination, BID-42, extends eligibility to businesses operating directly or indirectly within the agricultural value chain, as well as enterprises in other sectors whose income, operations or cash flows are materially dependent on agricultural activity.

The intervention recognises that the financial consequences of livestock disease outbreaks and adverse climatic conditions can extend beyond farmers to other businesses whose operations depend on agricultural production and trade.

To qualify, affected clients must demonstrate that their income has been adversely affected by the FMD outbreak and/or El Niño-induced climatic conditions.

Under the determination, eligible borrowers may apply for loan repayment moratoriums of between one and 24 months, loan restructuring or additional credit facilities, subject to assessments by their respective banking institutions.

The central bank has also introduced provisions aimed at protecting borrowers who receive relief from being negatively classified by credit bureaus.

Banking institutions are required to report clients granted relief under the determination as performing during its duration, rather than as non-performing borrowers.

However, this protection is subject to an exception where there is a material deterioration in credit quality, as provided for under BID-2.

The determination further requires banks to provide written reasons when an application for relief is declined.

Clients dissatisfied with how their applications are handled may lodge complaints through the relevant banking institution’s complaints process or other applicable dispute resolution mechanisms.

The Bank of Namibia said the intervention follows concerns raised during engagements between the agricultural and banking sectors, particularly regarding the challenges faced by financially distressed borrowers.

Through BID-42, the central bank aims to provide banks with regulatory flexibility to support affected clients while safeguarding financial and banking sector stability.