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Skills shortage hinders local banking ownership

The World Bank says Namibia’s lack of skills in the digital field has led to the banking sector being entrenched in uncompetitive behaviours and lacking sufficient local ownership.

In its strategy for Namibia’s economic growth and inequality reduction, the World Bank says the country’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.

“Access to credit and skills are concerns for improving the business environment,” the bank says.

The bank says these financiers serve large firms and have little incentive to invest in innovation and extend services to entrepreneurs, micro, small and medium enterprises (MSMEs), and excluded populations.

“The availability of skills, especially in digital fields and science, technology, engineering and mathematics remains a key constraint,” the report states.

Last year, finance and public enterprises minister Iipumbu Shiimi said to deal with the bottleneck that SMEs face, the government has disbursed N$398.8 million to over 360 businesses by September 2024 through its SME Recovery Loan Scheme, this was reported by The Brief.

The bank believes this requires investments in youth employment and improvements in education, from early childhood development through higher education.

“It also requires strengthening interventions and investments to bolster the quality, relevance and efficiency of technical and vocational education and training, while making long-term investments to improve the quality of higher education,” the report reads.

Currently, Namibia has Bank Windhoek which is a 100% locally-owned bank.

It was set up pre-independence as it was established in 1982 when a group of Namibian entrepreneurs took over eight local branches of Volkskas Bank.

Last year, the value of assets held by the Namibian banking sector in the first quarter of 2024 stood at N$177.9 billion.

This is N$77.9 billion more than Namibia’s budget for the 2024/2025 financial year, which was N$100.1 billion.

Economist Omu Kakujaha-Matundu yesterday said for competition, there needs to be an expansion of the business sector so as to have higher volumes to sell locally or for export at lower or competitive prices.

“By restricting credit access to only a few bigger companies, you leave a large section of the business sector, the SME sector, without much needed credit, which could have led to their expansion.”

He said the expansion of the SME sector will lead to economies of scale and, hence, cheaper products that will be globally competitive.

“So the big four does Namibia a great disservice.

The eligibility criteria of being given credit is biased against SMEs,” the economist.

Kakujaha-Matundu believes these banking companies see them as a high-risk bunch.

“Hence, the extending of loans to South African bigger companies, which are perceived to be low risk,” he added.

In an attempt to deal with challenges faced by SMEs, the Namibian government started the SME Bank in 2012 for them to access financing.

The SME Bank of Namibia encountered serious financial challenges, including significant financial mismanagement.

These allegations included instances where substantial sums of money were improperly transferred to entities operating within South Africa.

Moreover, an article published by Carnegie Endowment for International Peace states that Namibia’s close entanglement with South Africa has produced an institutional legacy that does not suit the needs of an independent country.

Cyber Security Institute in South Africa director Elmarie Biermann in the 2024 article argues that this inhibits Namibia’s ability to foster secure digital financial inclusion.

“The country has emulated South Africa’s approach, which does not adequately incorporate key domestic factors: Namibian user and cultural profiles, a unique threat profile, and particular digital and financial inclusion challenges.

“This results in a high exposure to cyber risks, particularly at the population level,” Biermann said.

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