Banking Reforms: Nam in efforts to indigenise financial sector
Windhoek –Namibia wants commercial banks to have sold 25 percent of their equity to local investors by 2025 or earlier, and is urging financial institutions operating in the country to also consider publicly listing their shares for trading on the Namibian Stock Exchange.
The move to compel banks to sell a quarter of their shareholding to local investors is part of a new financial sector strategy, which the government says is aimed at broadening the scope of financial services products in the country.
Namibia’s banking sector is currently dominated by four commercial banks, which are First National Bank Namibia, Standard Bank Namibia, Nedbank Namibia and Bank Windhoek.
First National Bank and Bank Windhoek are so far the only listed commercial banks on the local bourse.Finance Minister Saara Kuugongelwa-Amadhila says Standard Bank Namibia and Nedbank are expected to consider listing their shares on the Namibian bourse, as part of the localisation process.
“Existing banks have been encouraged and are expected to localise part of their shareholding, including listing on the Namibian Stock Exchange. As a result, one local bank (Bank Windhoek) listed on the stock exchange and the other remaining two are expected to follow suit,” Minister Kuugongelwa-Amadhila says.
While listing is important, government would pay special attention to having banks and other financial institutions selling shareholding to local investors.
“We are looking at a threshold of 25 percent by 2025 and we are now making it a licensing condition to compel banks to have local shareholding,” Minister Kuugongelwa-Amadhila says.
Government policy initiatives should equally be met by “locals who should not shy away from participating on the stock exchange”, Minister Kuugongelwa-Amadhila said.
“They should make use of these initiatives. For new banks entering the sector now, it’s now a requirement that locals retain a greater proportion of the shareholding,” the minister says.
Namibia’s central bank this year licensed EBank Namibia, which is in the process of rolling out commercial banking and could open its branches in November.
The central bank has also provisionally granted licences to Angola’s Privado Atlantico Europa and Letshego Bank Namibia, to start commercial banking operations, as authorities step up efforts to grow the sector dominated by South African lenders.
Some commercial banks “have committed to sell 40 percent shareholding over the next four years”, Minister Kuugongelwa-Amadhila has said, without naming the banks.
“It’s an ongoing process and we think there is some movement, we surely can improve the pace but we are happy we have started the process,” she said.
Licensing new entrants in the sector would “broaden access to financial services and give consumers choices on financial products”.
Competition in the banking sector “will bring innovation and benefit the consumers”.
“For the banking sector its better than forced regulation,” Kuugongelwa-Amadhila said.
Cash Deposit Fees Scrapped
Government is currently implementing a raft of changes in the financial sector under a new financial sector strategy, which aims to also regulate credit bureaux and improve the spread of banking services and products on the domestic market. Commercial banks are being compelled to scrap cash deposit fees for individual clients by March 2015, as part of the reforms, says Minister Kuugongelwa-Amadhila.
Namibia has piled pressure on commercial banks to scrap cash deposit charges over the past years, leading to complete removal by next year.
According to Minister Kuugongelwa-Amadhila, “The banking institutions are at liberty to remove these cash deposit fees in a phased approach, provided that this is completely achieved by March 31, 2015. Cash deposit fees will remain chargeable items on big businesses and corporate accounts.”
As part of the changes, the central bank would also start registering credit bureaux and their consumer credit information collection and management activities would be regulated by the central bank.
Credit bureaux are now compelled to give consumers the right to credit reports, to inform consumers of right to challenge information maintained in credit bureau database, protect confidentiality of consumer information through restrictions on use of credit performance information.
Whereas previously credit bureaux would only use negative credit information, they are now compelled to submit positive credit performance information as well to enable consumers to score points.
The conduct of credit bureaux was such that “positive behaviour (of consumers) was never rewarded”. “Credit bureaux have been choosing negative information and creating a distorted image about an individual. They must be regulated and the central bank is going to be a referee on this. There will be a set of rules by which credit bureaux will be expected to conduct themselves,” Minister Kuugongelwa-Amadhila says.
Namibia aims to have reduced the lack of access to financial services and products of the economic active Namibians to 26 percent by 2021, from 51.7 percent in 2007. There has been an improvement in financial inclusion, which reached 69 percent of the population, or reduced financial exclusion to 31 percent, based on the 2011 FinScope survey results.