The strong capitalisation and oligopolistic characteristics of the Namibian banking sector is expected to enable them to cope with rising asset risk, at least over the short to medium term. We currently expect non-performing loans to increase to 5.5%-6.0% by FY2020. However, there is a real risk that economic conditions will remain depressed for much longer than expected and asset quality will deteriorate even further.
The structure of the Namibian banking sector is similar to that of South Africa, with relatively few players that dominate the market. This includes three local subsidiaries of the big South African banks, which allows for transmission of risk and capital management protocols from the sophisticated South African financial system to the local market.