Low-income earners to receive proper financial services

August 31, 2015, 9:07am

Low-income earners to receive proper financial services

In order to address the financial exclusion of low- income earners, the Bank of Namibia (BoN) will introduce the Basic Bank Account (BBA) facility, The Villager has learnt.

The BBA will cut out the loopholes of inclusion in the financial sector as the latest statistics reveal that 31% of the total population is unbanked.

However, the latest FinScope Survey of 2012 indicated that the level of financial inclusion increased to 69% from the baseline of 48 per cent in 2007.

Emma Haiyambo is the Acting Director of Strategic Communications and Financial Sector Development at BoN, and told The Villager that the introduction of the BBA with minimal charges is aimed to benefit low- income earners and is deemed as a pragmatic intervention to deal with financial exclusion.

She said in order to promote financial inclusion, it has been deemed necessary to address the issue of high fees and charges which have characterised the Namibian financial system.

“High fees and charges contributed to the exclusion of the majority of society from participating in the formal financial system. In this regard, some specific standards were implemented to address this matter,” Haiyambo stated.

According to her, all commercial banks have introduced the BBA, and thus the number of active basic bank accounts has been increasing.

In 2012, the country launched the Financial Sector Strategy, a long-term development strategy which advocates for various reforms and initiatives in the financial sector, and includes the need to achieve financial inclusion.

Haiyambo said currently, the strategy is in full swing, with various steps already having been taken to enhance financial inclusion, which steps include consumer financial literacy and protection, and fostering access to financial services and products.

“The other intervention was the Issued Standards on Cash Deposit Fees, which removed all cash deposit fees charged by banking institutions to all individual accounts, and accounts belonging to businesses with a turnover of N$1 million or less. This became effective from 31 March 2015,” Haiyambo said.

She added that in an effort to address the challenges to accessing finances by Small to Medium Enterprises (SMEs), Credit Bureau regulations were gazetted in July 2014.

These regulations were drafted in terms of the Bank of Namibia Act to regulate the operations of credit bureaus in Namibia, which regulations are now compelling lending institutions to provide credit performance information to registered credit bureaus.

“Also, the Financial Literacy Initiative, a national platform to enhance financial education for individuals and small businesses, was launched to contribute to the narrowing of the financial exclusion gap through creating awareness of financial services and products. This is being carried out by the collaborating institutions who agreed, through signing a Memorandum of Understanding, to jointly design, fund and undertake targeted financial education and consumer protection initiatives in the country,” Haiyambo said.

In order to ensure consumer protection, the code of banking practices and guidelines for lodging customer complaints by the BoN and Bankers’ Association of Namibia (BAN) was launched in 2013.

“There are also various initiatives being undertaken in partnership with other financial institutions to foster access to finances, especially for SMEs, which once successfully implemented, will significantly enhance financial inclusion,” the official stated.

Haiyambo said the other reasons why there is still a population which is unbanked is because they might have a lack of income, and therefore people would not even open bank accounts.

“For instance, due to socio-economic challenges such as unemployment, a significant percentage of the population might not have income, and consequently bank accounts. The other reason for a lack of accessibility to financial products and services could be due to the vast geographical set-up of the country. As such, many people residing in rural areas do not have access to financial services and products, though this situation has improved significantly as the number of bank branches had increased countywide in recent years. Mobile banking services have also been introduced in the country,” she continued.

Isack Hamata is the Manager of Corporate Communications at the Namibia Financial Institutions’ Supervisory Authority (NAMFISA), who said Namibia has the third-highest banking rate in the Southern African Development Community (SADC) after South Africa and Mauritius.

“Our concern as a regulator is rather that although many Namibians have bank accounts, they are still not included in terms of participating in the ownership of financial institutions and owning investment accounts,” he stated.

by Charmaine Ngatjiheue