CREDIT TO BUSINESSES UP 9.5%

MBABANE – Despite an unfavourable economic climate, there is still appetite for credit among businesses.

Credit extended to businesses settled at E7.1 billion at the end of August this year. It was a fall by 0.5 per cent month-on-month, but an increase of 9.5 per cent year-on-year. This is as per the monthly statistical report from the Central Bank of Eswatini. Credit to some subsectors increased over the review period. These included distribution and tourism (10.9 per cent); transport and communication (7.4); real estate (4.3 per cent) and construction (1.4 per cent).

Subsectors accounted for the month-on-month slight decline, on the other hand, included community, social and personal services (-27.0 per cent); manufacturing (-18.9 per); agriculture and forestry (-7.5); as well as mining and quarrying (-0.7). Meanwhile, credit extended to the private sector increased by 0.1 per cent from the previous month and 8.6 over the year to settle at E16.1 billion at the end of August this year. The improvement in private sector credit was driven by credit to other sectors and households and non-profit institutions serving households (NPISH)). Partly dampening the growth was a fall in credit to businesses.

Credit extended to other sectors expanded by 1.5 per cent over the month under review, However, compared to August last year, it declined by 1.2 per cent to reach E1.5 billion at the end of August 2021.  Accounting for the month-on-month growth was an increase in all components of credit to other sectors. Consequently, credit to local government, public nonfinancial corporations and other financial corporations rose by 9.7, 1.3 and 1.2 per cent, respectively.

Credit extended to households and NPISH amounted to E7.5 billion at the end of the review month, reflecting an increase of 0.5 per cent month-on-month and 9.9 per cent year-on-year. Contributing to the growth was motor vehicle finance and other personal (unsecured) loans, which improved by 5.7 to E1.0 billion and 0.7 per cent to E2.9 billion, respectively. Mortgage loans on the other hand, receded by 1.1 per cent to reach E3.6 billion at the end of August 2021. Net claims on government with the banking sector, on the other hand, stood at E953.6 million at the end of August 2021. They were higher than the E507.0 billion observed in July  this year.

The rise was largely on account of an advance from the Central Bank of Eswatini (CBE) over the month under review. As a result, a notable month-on-month growth of 11.6 per cent was observed in claims on government. Government deposits also increased, albeit, at a lower rate of 4.9 per cent compared to July this year. Broad money supply (M2) reached E20 billion at the end of the review month, reflecting a decline of six per cent month-on-month and a rise of 4.7 per cent year-on-year. The month-on-month contraction in M2 was in line with the prevailing weak economic conditions faced by the country, which to a large extent are exacerbated by the effects of the COVID-19 pandemic.

Supply

The fall in M2 was reflected in both components; narrow money supply (M1) and quasi money supply. Narrow money supply (M1) settled at E7.8 billion at the end of August 2021, 8.5 per cent lower compared to July 2021 and 14.5 per cent higher over the year. The month-on-month decline was underpinned by a fall in transferable (demand) deposits and Emalangeni outside depository corporations by 9.2 per cent to E6.9 billion and 2.2 per cent to E854.9 million, respectively.
With regard to quasi money supply, it fell by 4.4 per cent month-on-month and 0.6 per cent year-on-year to close at E12.3 billion at the end of August 1. An analysis of the components of quasi money supply revealed that time and savings deposits shrank by five per cent to E10.3 billion and 0.7 per cent to E1.9 billion, respectively.

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