Istituto di Economia Internazionale - Determinants of Non-Performing Loans in Namibia

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Corresponding Author:
Valdemar J. Undji, Department of Economics, University of the Western Cape, South Africa

Coauthors:
Johannes P.S. Sheefeni, Department of Economics, University of the Western Cape, South Africa

Determinants of Non-Performing Loans in Namibia

Volume 79 - Issue 2, May 2026
(pp. 199-244)
JEL classification: C53; E17; G21 Doi: 10.65644/EIIE.079.02.0199
Keywords: ARDL; Banking Sector; Namibia; Non-Performing Loans; Vector Autoregressive

Abstract

This paper uses time-series data from 1996Q1-2021Q4 to examine the determinants of non-performing loans (NPL) in Namibia’s banking industry and test for causality between NPL and its determinants. To accomplish this, the Autoregressive Distributive Lag (ARDL) and the Vector Autoregressive (VAR) pairwise Granger causality modelling approaches are employed. The findings reveal that in Namibia, NPL is influenced by a host of factors, including its own past values, output gap, unemployment rate, housing prices, return on assets, return on equity, lending behaviour, loan-to-deposit ratio, loan growth, narrow money supply, broad money supply, net foreign assets, repo rate, interest spread, deposit rates, private sector credit extension, oil prices, COVID-19 pandemic crisis, stock market prices, regulatory quality, government effectiveness, and the rule of law. The Granger causality test results indicate strong unidirectional causality running from past values of NPL, unemployment, housing prices, capital adequacy ratio, loan growth, and oil prices to NPL. Additionally, a bidirectional causal relationship exists between the repo rate, lending rate, and NPL. The policy implications emanating from this study need to be addressed in order to ensure the stability of the country’s financial system.

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Determinants of Non-Performing Loans in Namibia

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Institute for International Economics of the Genoa Chamber of Commerce

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