Financial institutions act faces fresh hurdles in parliament

The implementation of the Financial Institutions and Markets Act (Fima) is faced with further delay as parliamentarians push for greater oversight of its regulations.

Fima, initially slated to take effect in 2022, has faced criticism from various sectors after a decade-long drafting process.

Parliamentary standing committee on budget and finance chairperson Phillipus Katamelo last week insisted that the minister of finance and public enterprises table section 465 of the act.

“The finance minister must table in the National Assembly the regulations referred to in section 465 of the Financial Institutions and Markets Act, before implementation and enforcement of the regulations by the Namibia Financial Institutions Supervisory Authority for parliamentary approval,” he said.

Section 465 of Fima empowers the minister to define ‘micro-insurance’ and establish benefit thresholds and criteria for micro-insurance products, allowing for regulatory flexibility.

Furthermore, a recommendation calls for all bills tabled in the parliament to include a section mandating the finance minister to present regulations to the National Assembly for approval before enforcement.

“It is high time the recommendation as contained in the Fima report be enforced and implemented within 90 days,” Katamelo said.

Additionally, the committee seeks to ensure mortgage bonds on houses, including land, can be secured by a pledge of benefits, as specified in relevant regulations.

During consultations, concerns arose regarding the act’s potential for complex application, with some regulations intended to streamline implementation instead increasing administrative costs.

The industry, trade unions, and the public have also voiced concerns about inadequate consultation.

This has contributed to the postponement of a regulation which would have mandated that employees only access 25% of their retirement savings before age 55.

The non-banking financial industry is a major sector in Namibia, with assets exceeding N$460.1 billion by the third quarter of 2024.

Pension funds constitute the largest sub-cluster, with combined assets of N$254.8 billion by the third quarter of 2024.

The non-banking financial industry is largely dominated by five players, accounting for 70% to 90% of the market share.

Fima aims to replace outdated legislation, such as the Pension Fund Act of 1956, and address shortcomings in the current regulatory framework for the non-banking financial sector.

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