by Nghinomenwa Erastus
THE Agricultural Bank of Namibia will cut interest rates for all clients to cushion the agricultural sector against the impact of Covid-19.
This is part of the relief package backed by a N$200 million guarantee from the government that was announced early in April by finance minister Shiimi Iipumbu.
The N$200 million is part of the N$8,1 billion government stimulus package.
Other interventions include a repayment holiday and the delisting of clients from ITC.
Announcing the package this week, AgriBank’s chief executive officer Sakaria Nghikembua said the bank’s decision to reduce interest rates will cost the institution around N$43 million over 12 months.
Interest rates on all financial products will be reduced to 8%, and those below 8% will remain as they are.
Late payment charges will also be reduced from 2% to 1,5% during the relief period.
Meaning for those who are going to borrow during the relief period which run from 1 June 2020 to 31 May 2021, will borrow at lower rates, while those repaying their loans and outstanding premiums, will save round 0,5% maximum.
Nghikembua explained that on top of rates cuts, clients who can demonstrate their losses and the impact on their operations and might be struggling to service their loans can apply to be granted a 12-month recovery period.
“Clients will be treated on a case by case basis on merit. The repayment holiday applies to capital and interest on that instalment,” he said.
He warned that the repayment holiday will not mean the premium that clients are supposed to pay during the relief period, will be added to the outstanding loan value through the process of capitalization, together with an extra year of repayment.
Through the repayment holiday, the bank requires the full collateral pledged by the client to back up the loan, and as soon as the period ends, normal payment will resume.
As part of the package, the bank will also show leniency to those with a loan in delinquency and are relegated to deal with the internal and external legal team through delisting from ITC and help them structure their loan to have a long repaying period.
Delisting from ITC and restructuring of those in red will be conditional to clients pay a minimum of 10% to 20% of their outstanding arrears, however for those forwarded to external legal entities will need to pay 30% to enjoy the two benefits.
On top of the relief, the bank will lend N$200 million to the agricultural sector with government guarantees.
The loan, which has a 12-month grace period, is to stimulate production and help farmers to diversify income streams and enhance resilience.
Nghikembua said the bank will source the N$200 million from the domestic market.