BoN pours cold water on World Bank fears of uncompetitive industry – Business

The Bank of Namibia (BoN) says the local banking industry has a modern, financially sound, and stable financial system.

Central bank spokesperson Kazembire Zemburuka says the central bank has launched several strategic initiatives aimed at enhancing access to financial services across various sectors of the economy.

He was responding to concerns from the World Bank about Namibia’s banking sector.

The World Bank stated that Namibia’s banking sector is heavily concentrated and uncompetitive, with four large financial conglomerates, three of which are subsidiaries of South African banks, holding 98% of total bank assets.

“While the World Bank Country Partnership Report describes Namibia’s banking sector as highly concentrated and uncompetitive, we believe that Namibia has a modern, financially sound, and stable financial system, given the size of our economy,” says Zemburuka.

“The bank continues to provide technical support for the implementation of three key facilities: the credit guarantee scheme, the mentoring and coaching programme, and the venture capital fund, all designed to enhance access to finance for small businesses,” he says.

Another initiative Zemburuka mentioned was their facilitation of the introduction of branchless banking models and microfinance institutions in the country to increase access.

Economist Salomo Hei yesterday said because banks operate with a strong focus on risk aversion, they tend not to actively pursue loan deals with small and medium-sized enterprises (SMEs).

This creates the funding gap within the SME sector.

“What you would like to see essentially is the opening up of that space, the opening up or the closing of the funding gap, or bridging the funding gap to be able to chase SMEs and entrepreneurs as a basis to unlock value in the untapped market,” Hei said.

He highlighted that there is also a big part of government procurement that goes through the banking sector.

“And if there’s a targeted mechanism to be able to pick up those deals through SME initiatives, it will go a long way in addressing the challenges around the funding gap that exists and making sure SMEs are then represented.

“But currently as it stands, a big part of the business models of banks are around risk aversion,” he said.

Economist Winnie Thebuho on Friday said the bank’s view is noted, but there are challenges and considerations.

Thebuho said even with technological advancements, physical access to financial services may remain a challenge in remote areas.

“The cost of financial services may be prohibitive for some marginalised communities,” she said.

Thebuho said effective financial literacy programmes are essential to ensure that marginalised communities can utilise financial services effectively.

“To maximise the impact, financial institutions and policymakers need to implement targeted interventions that address the specific needs of marginalised communities,” she added.

The economist said a modern, stable financial system can be a powerful tool for promoting economic inclusion and reducing poverty among marginalised communities in Namibia.

She referred to a BoN document published on 30 May 2024 stating: “The central bank stated that although a large percentage of Namibians, around 78%, now have bank accounts, this hasn’t translated into widespread use of financial services, particularly in rural regions.”

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