BoN directs banks to grant farmers up to 24-month loan repayment holidays

CHAMWE KAIRA

The Bank of Namibia has directed commercial banks to grant up to 24-month loan repayment moratoriums to farmers and businesses affected by the Foot-and-Mouth Disease (FMD) outbreak and anticipated El Niño-induced climatic conditions.

The intervention, issued on Friday under Determination BID-2, requires banking institutions to assess affected borrowers’ financial circumstances, income losses and repayment capacity before granting relief.

The determination follows concerns raised during engagements between the agricultural and banking sectors over financially distressed farmers and businesses facing pressure from the combined effects of the FMD outbreak and adverse climatic conditions.

Under the new requirements, banks must provide eligible borrowers with repayment holidays ranging from one to 24 months.

They may also restructure existing loans to make repayments more manageable and improve borrowers’ ability to repay their debt.

Interest will continue to accrue at the contractual interest rate during loan restructuring, unless the bank and borrower agree otherwise in writing.

Eligibility extends beyond farmers directly affected by FMD or adverse weather conditions to businesses operating within the agricultural value chain, including companies whose income, operations or cash flows depend materially on agricultural activity.

Borrowers seeking assistance must demonstrate that their income has been adversely affected by the disease outbreak or climatic conditions.

The Bank of Namibia has also introduced protections around credit bureau reporting, requiring banks to report clients granted relief under the determination as performing rather than non-performing for its duration.

However, this protection is subject to existing requirements under BID-2 where there is a material deterioration in a borrower’s credit quality.

Banks must provide written reasons when an application for relief is declined.

Borrowers dissatisfied with the handling of their applications may lodge complaints through their banks’ internal complaints processes or other applicable dispute resolution mechanisms.

The central bank said the intervention is intended to provide regulatory flexibility to banks to support the continued viability of the agricultural sector, protect livelihoods and limit risks to financial system stability.

Agriculture remains an important contributor to employment, food security and economic growth, while the FMD outbreak and adverse climatic conditions pose risks to farmers and businesses across the agricultural value chain.

#WindhoekObserver