Namibia to legally abolish risky cheque payments

September 21, 2022

Minister of Finance Iipumbu Shiimi has tabled the Cheque Bill in Parliament to mark a final end of Cheques as a mode of payment.

The system was phased out in June 2019, but was still lacking a legal basis to back its abolishment.

"The key reasons for the banking industry's decision to phase out cheques were that Cheques have proven to be a risky payment instrument due to being highly susceptible to fraud relative to other payment instruments such as, Cards and Electronic Funds Transfer (EFT)," said Shiimi, explaining the basis.

Other underlying factors were that cheques were becoming increasingly expensive and inefficient payment instruments, both from an operational and infrastructure point of view.  

"In this regard, Namclear (the automated clearing house) ailing cheque infrastructure was also a major concern, as it had reached the end of its operating life cycle. Furthermore, it had been extremely difficult for Namclear to source the requisite parts for the Cheque Processing System, as cheques were becoming obsolete and were no longer supported by the respective suppliers.  

"As such, the industry was not prepared to further invest in the ailing infrastructure given the risks associated with the 3 payment instruments and the low volumes experienced. While interim solutions had been adopted i.e. purchase of additional hardware components, these did not have a long-life span and were only set to be operational until 30 June 2019," further explained the former governor of the Bank of Namibia.  

According to Shiimi, since 2004 there has been a steady decline in the cheque volumes, a decreased number in usage, "in fact, the cheque volumes processed between 2014 and 2018 significantly decreased by about 79.8%."

As the usage continued to decline, the cost of cheque to consumers was substantially going high, on fees charged for the instrument and transactional fees, as compared to EFT, Card and E-Money. 

"The high fees experienced by consumers could be attributable to the reduction in cheque volumes which meant that consumers paid increased charges per transaction. Furthermore, with regards to infrastructural costs, any infrastructural replacements or updates as required by Namclear would further result in an increase in cheque handling costs, which would be passed down to consumer fees," he reiterated.


In addition, the Minister said, as the process was ongoing, the Bank of Namibia was also conducting numerous engagements with various stakeholders from the affected communities, as well as fellow regulatory authorities, mostly, the Communications Regulatory Authority of Namibia (CRAN). The engagements were to assess the network coverage in Namibia. 

"A satisfactory report was provided by CRAN which provided the confidence that when cheques were eventually phased out, there would be sufficient network coverage, which would further underpin the expansion of banking or payments services in currently affected areas. Engagements were also held with the Ministry of Justice for the necessary guidance concerning the amendment of the relevant provisions in the identified national laws," he said, 

While customer education was underway, the Bank with the assistance of the Ministry of Justice commenced with the drafting of the Abolition of Payment by Cheque Bill, which upon completion was submitted to the Ministry of Finance in October 2018.  

The Bill was shared with relevant Ministries, notably the Ministry of Labour, a unanimous decision was reached by the banking industry and the Bank of Namibia that the last date of issuing cheque books to clients would be on 30 September 2018 and the ultimate phasing out of cheque would be on 30 June 2019, said Shiimi.   

In the same vein, he said the banking industry was notifying their customers of the last date for issuing and depositing cheques drawn.  

"Given the aforesaid, PAN issued a public notice in late 2018 to inform the public of the phasing out of cheque as a payment instrument within the National Payment System on the 30th of June 2019. To ensure a seamless phase out, 24 June 2019 was the last day for customers to deposit a cheque as a payment instrument, provided that the cheque was dated on or before 1 February 2019. No banking institution would accept cheques for processing after 24 June 2019. 29 June 2019 was the last day for the interbank clearing of a cheque as a payment instrument," he told parliamentarians as he passed the motion seeking support for the enactment of the bill.

                                                                                                        

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Last modified on Friday, 23 September 2022 02:00