EXPLAINER: Inside BoN’s FMD relief package for farmers

To buffer the economy against further disruptions from the Foot-and-Mouth Disease (FMD) outbreaks and looming El Niño climate crisis, the Bank of Namibia (BoN) on Friday enacted the BID-42 directive, which compels commercial banks to offer financial relief to distressed farmers.

Through the latest BID-42 financial relief package, the central bank aims to safeguard financial sector stability, preserve rural livelihoods and protect agriculture’s critical contribution to national employment and food security.

The BID-42 regulatory directive was enacted under the theme: A 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.

The framework provides for cash-flow relief through temporary repayment holidays, loan restructuring and expanded credit without triggering technical defaults.

Here is a detailed breakdown of how the relief package will work, who qualifies and what is legally required from the country’s commercial banking institutions.

How the relief will work

The core mechanism of BID-42 is regulatory flexibility.

The central bank is temporarily easing standard banking regulations, allowing commercial banks to extend a financial lifeline to struggling farmers without penalising them or triggering automatic credit defaults.

By providing this breathing room, the central bank aims to cushion productive sectors of the economy and prevent a domino effect of bad debts from destabilising the broader financial system.

How will farmers, agribusinesses benefit?

The policy outlines distinct mechanisms to help farmers navigate cash-flow shortages caused by FMD and drought: Here is how farmers and agribusinesses will benefit.

Repayment holidays: Affected borrowers can secure a loan moratorium lasting anywhere from 1 to 24 months.

This temporarily halts regular loan repayments, allowing farmers to redirect scarce capital toward keeping their operations alive.

Manageable restructuring: Banks are authorised to restructure existing loans, adjusting terms and payment schedules to align with the borrower’s reduced income and improved chances of ultimate repayment.

Emergency support funding: Farmers and agricultural clients can apply for new credit facilities and cash injections to sustain their operations, provided they maintain a viable risk profile and show an ability to service the new facility.

Credit bureau protection: To prevent long-term financial ruin, clients granted relief under BID-42 will continue to be reported as “performing” to credit bureaus.

They will not be flagged as non-performing or defaulted, protecting their credit scores unless a severe, unrelated deterioration in credit quality occurs.

Who qualifies for relief?

The directive features a wide eligibility net that recognises how deeply agriculture is intertwined with the Namibian economy.

Relief is available to primary producers, including livestock, crop and wildlife farmers directly hit by El Niño or Foot-and-Mouth Disease (FMD).

Direct and indirect participants in the broader agricultural value chain can also benefit from the package, while businesses in entirely different sectors, provided they can prove their income, day-to-day operations or cash flows, are materially dependent on agricultural activity can also benefit. To access these measures, clients must actively demonstrate to their bank that their income has been adversely affected by the FMD outbreak or adverse climatic conditions.

Each application is subject to an individual assessment of the client’s specific financial position and ultimate repayment capacity.

What is expected from the banks?

BoN has laid out strict guidelines to ensure commercial banks implement these relief measures fairly and transparently.

Pass on the flexibility: Banking institutions are expected to utilise this regulatory leeway to offer meaningful, appropriate relief options rather than enforcing rigid, standard repayment structures.

Maintain contractual interest: Unless otherwise agreed upon in writing between the bank and the client, interest will continue to accrue at the original contractual rate during the restructuring or moratorium period.

Mandatory written justification: Banks cannot simply reject distressed applicants without accountability. If an application for relief is declined, the banking institution is legally required to provide the client with written reasons for the refusal.

Clear paths for client recourse: Banks must ensure dissatisfied clients have clear access to the institution’s internal complaints process or other applicable dispute resolution mechanisms to contest unfair treatment.

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