By Jaezuruka Ndjarakana
What comes to mind when the average Namibian is asked about our financial system is just the big four commercial banks and a few insurance companies, but our financial system goes beyond that, it is important to our country’s economy and has advanced overtime.
Our financial system can be broken into two sectors, namely the banking sector, its payment infrastructures/mechanisms, and the non-banking financial sector. The banking sector consists of the four major commercial banks; FNB, Standard bank, Bank Windhoek and Nedbank, other licensed banks such as Letsego & Bank Bic and other specialized lending institutions.
Commercial banks have four types of segments, the first being retail banking, which is banking services to individuals such as you and I. The second segment being business banking, which is banking services for businesses.
The third segment, being private banking, is specialized banking services to high net wealth individuals. The last segment being corporate and investment banking, this refers to customized banking services for companies such as capital raising and so forth.
Commercial banks focus on receiving deposits from retail and business clients for safe keeping (these deposits are than considered as liabilities on their book), they make it possible for the clients to make payments to others in a fast and cost-effective manner (these payments can be electronic fund transfers EFT debit orders, easy wallets, blue wallets and so forth), they also provide different types of loans such as home loans (better known as mortgages) installment sales agreements (better known as vehicle asset financing), personal loans and overdrafts.
The banking sector also comprises of specialized banks or lending institutions which are development financing institutions (DFIs) such the Development bank of Namibia (DBN) which advances loans and credit to businesses/projects that are of a developmental nature for example infrastructure projects, state owned enterprises, small and medium enterprises, and young entrepreneurs. The Agricultural bank of Namibia which advances loans to farmers also falls within this category.
The value of assets held by the Namibian banking sector in the first quarter of 2024 stood at N$ 177.9 billion, these assets are primarily made-up mortgages, business and personal loans, vehicle asset finance. The banking sector of Namibia is adequately capitalized this mean they have sufficient assets to meet their liabilities, in addition to that, Namibian banks are very profitable. The Namibian banking sector is regulated by the bank of Namibia (BoN).
The second sector of the financial system is the non-banking financial sector, this is more interesting as it has many institutions playing different roles. The first type institution we have are the pension funds, these are institutions that collect pension contributions from individuals and their employers for the duration an individual’s employment, invest it and at retirement payout a one-third and annuities for the lifetime of the individual. GIPF is the biggest pension fund in Namibia with assets of about N$ 151 billion as the 2023 and with 95,000 members.
The second type of institution is insurance companies, they manage risks for individuals and companies. They provide long and short-term insurance. The difference between the two, is long term insurance is cover for losses that are definite to happen such as death while short term is insurance is cover for losses are not certain to happen such as a vehicle insurance and sort forth. The bigge
st insurance companies comprise of Old Mutual, Sanlam, Metropolitan and others. The assets held by insurance companies in the first quarter of 2024 stood at N$ 82 billion.
Thirdly investment managers, they manage listed investments (stock or security listed on an exchange) and unlisted investments (stock or security not listed on an exchange) for retail and institutional clients. They grow these investments, They go as far as providing private equity funding, mezzanine debt and venture capital to businesses.
Their examples include Ino Harith capital, Catalyst Investment managers and others. Pension funds and insurance companies are two institutions that allow savings to be channeled into investments, through investment managers. Collective investment schemes and Investment managers in Namibia manage assets valued at N$ 90 billion in the first quarter of 2024.
The fourth player in the non-banking sector includes micro-lenders or better known as micro-financiers. They provide short term loans, pay day loans and pawn loans to clients or businesses that are mostly risky and cannot obtain funding from commercial banks. They take up more risk and in doing so they charge higher interest rate ranging from 27%-30%. It is interesting to note that the assets held by micro financiers in the first quarter of 2024 stood at N$ 7.157 billion.
The other players in the non-banking sector are stock exchanges, this where the securities of companies are traded, we only have one stock exchange in Namibia, which is the Namibia stock exchange. Another player is stockbrokers, they facilitate the buying and selling of securities on stock exchanges, their examples include Simonis storm securities and Cirrus capital.
The Namibia financial institutions supervisory authority (Namfisa) regulates the non-banking financial sector of Namibia. The aggregate value of assets held by the non-banking financial sector in Namibia stood at N$ 426.8 billion in the first quarter of 2024.
An assessment conducted by BoN and Namfisa found that Namibia’s financial system remained stable, sound, and resilient with no major disruption or disorderly functions of key financial services, despite a slowing economic growth.
I conclude with a quote by Jarome Powell, a renowned attorney and investment banker who once said “We need a resilient, well capitalized, well-regulated financial system, which is strong enough to withstand serve shocks and support economic growth by lending throughout the economic cycle” Namibia’s financial system has proven to be sound, resilient, and well regulated.
*Jaezuruka Ndjarakana is a young finance professional with 2 years of experience in business banking. He can be reached at jaezurukandjarakana@gmail.com
