Bank Fees to Be Made Transparent

BANK fees in Namibia are to become more transparent if a planned study by the German government development agency GIZ comes to fruition.

Documents made available to The Namibian by GIZ show that the study will lead to the development of a tool called Dynamic Competition Scheme (DCS), for the commercial banking sector in Namibia.

This tool is expected to aid the Bank of Namibia to collect, analyse and compare fees and charges raised by commercial banks.

The GIZ says in the documents that the scheme will allow the central bank as the regulatory authority to improve transparency and encourage competition through information sharing.

HIGH FEES

Due to numerous concerns that fees and charges in the Namibian banking sector are excessively high, the Bank of Namibia (BoN) completed a study on the efficiency and cost effectiveness of payment services in Namibia in 2009. This study revealed the apprehensions surrounding the banking industry in Namibia by concluding that the fee structure was not transparent, neither to the regulator nor to the general public, the GIZ says.

The report made recommendations such as the implementation of a ‘direct charging model’ for ATM withdrawals and the disclosure of fees, charges and terms and conditions of products and services in the banking halls, in order to help improve the efficiency, cost effectiveness and transparency of fees for payment services and products in Namibia.

In addition, the Ministry of Finance commissioned a study on fees and charges for financial services and their effects on the access to these services for the low income population. The study, published in 2010, supported the previous recommendations made by the central bank and provided additional propositions to make banking more accessible and affordable.

ANTI COMPETITIVE

The GIZ says many years of research have shown that the limited depth of the banking sector, with only four fully fledged banks has caused a distortion in general business practices regarding the pricing of payment services and products which consequently tend to be anti-competitive, opaque and oligopolistic.

“It has generally been deemed necessary that further interventions are required to rectify the imbalances in the structure of fees and charges for payment services in Namibia. As such, the Payment System Management Amendment Act was promulgated in 2010, which gives the BoN powers to ensure that fees and charges are in line with the principles of competition, cost-effectiveness, efficiency and the public interest,” the GIZ says.

The FinScope Consumer Survey Namibia conduced in 2012 said there was a reduction in the unbanked rate from 55% to 38% since 2007.

GIZ says despite this improvement, there is still a key concern that banking services remain unattainable to the remaining share of the unbanked population.

“One of the key reasons for people not being banked is attributed to the excessive charges being incurred for banking and payment services.”

In 2012, the central bank started a comparison exercise on fees and charges related to payment services in 2012.

“However, this comparison has given very limited information and has therefore left the BoN with numerous unanswered questions, particularly given the fact that commercial banks’ payment services are often bundled, unclear and therefore difficult to compare,” the GIZ says.

The central bank believes that transparency and comparability of banking charges will increase competition in the banking sector.

“The collected fees and charges for selected payment services will later be employed in the conceptualisation of a cost based pricing model framework, which allows relating the fee of a payment service to its actual cost,” the German agency says.

Source : The Namibian