Bank at the Post Office: Minister

FINANCE Minister Saara Kuugongelwa-Amadhila is promoting the use of Post Office banking services and credit unions as a way to avoid the exorbitant bank charges of commercial banks.

She told the National Assembly last week that promoting competition in the financial sector was key to addressing the high service charges of Namibian financial institutions. Kuugongelwa-Amadhila confirmed that bank charges in Namibia were among the highest in the region.She said it was known that banks increasingly depended on bank charges for their profitability, with some banks deriving up to 50 per cent of their income from charges alone.Responding to a motion to discuss the burden placed on the public by banks and creditors, Kuugongelwa-Amadhila said NamPost banking services offered a more cost-effective alternative for savers.She also said Government would explore the option of establishing a credit union.A credit union is a member-owned financial co-operative.As soon as someone deposits funds into a credit union account, the person automatically becomes a partial owner and participates in the union’s profitability.Kuugongelwa-Amadhila suggested that pension schemes could provide the seed capital for a credit union.”This option could provide an alternative source of financial services (both savings and lending) that is more affordable to the majority of the people,” said Kuugongelwa-Amadhila.The Finance Minister said bank charges revealed important aspects about the banking sector and disclosed the level of competition.”An increase in competition would allow individuals to walk away from an institution if its charges are too high or if its service is poor, because there are many alternatives.In our situation there are few players in the market”, said Kuugongelwa-Amadhila.She said although the banking sector had grown significantly, with its assets increasing by over 100 per cent in nominal terms between 1998 and 2003, the growth had not resulted in improved competition.This situation, she said, could be attributed to mergers and acquisitions in the financial sector.While the difference between interest charged on loans and interest paid on deposits is higher in Namibia than in South Africa, Kuugongelwa-Amadhila said it was still lower than elsewhere in the Common Monetary Area (CMA).She said it was also encouraging to note that lending rates have been dropping in Namibia.Kuugongelwa-Amadhila confirmed that bank charges in Namibia were among the highest in the region.She said it was known that banks increasingly depended on bank charges for their profitability, with some banks deriving up to 50 per cent of their income from charges alone.Responding to a motion to discuss the burden placed on the public by banks and creditors, Kuugongelwa-Amadhila said NamPost banking services offered a more cost-effective alternative for savers.She also said Government would explore the option of establishing a credit union.A credit union is a member-owned financial co-operative.As soon as someone deposits funds into a credit union account, the person automatically becomes a partial owner and participates in the union’s profitability.Kuugongelwa-Amadhila suggested that pension schemes could provide the seed capital for a credit union.”This option could provide an alternative source of financial services (both savings and lending) that is more affordable to the majority of the people,” said Kuugongelwa-Amadhila.The Finance Minister said bank charges revealed important aspects about the banking sector and disclosed the level of competition.”An increase in competition would allow individuals to walk away from an institution if its charges are too high or if its service is poor, because there are many alternatives.In our situation there are few players in the market”, said Kuugongelwa-Amadhila.She said although the banking sector had grown significantly, with its assets increasing by over 100 per cent in nominal terms between 1998 and 2003, the growth had not resulted in improved competition.This situation, she said, could be attributed to mergers and acquisitions in the financial sector.While the difference between interest charged on loans and interest paid on deposits is higher in Namibia than in South Africa, Kuugongelwa-Amadhila said it was still lower than elsewhere in the Common Monetary Area (CMA).She said it was also encouraging to note that lending rates have been dropping in Namibia.