Reaching out to the Unbanked

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By Wezi Tjaronda WINDHOEK Following a general outcry over high bank charges that reduce the accessibility to and affordability of banking services for low-income earners, the low-cost products of some commercial banks have attracted tens of thousands of previously unbanked clients. Two banks, First National Bank (FNB) and Bank Windhoek combined, have attracted 60 000 clients who were formally unbanked with low-end market products called Card Wise and Easy Save respectively. These developments were triggered by the public outcry and various studies that were conducted to determine the size of the unbanked population. The two banks last year came up with products that cater for people with low salaries. FNB’s Card Wise caters for a clientele that earn between zero to N$2 000, while Easy Save’s threshold is aimed at salaries of less than N$15 000 per year. While FNB has so far reached 40 000 clients with its end of the market range, its counterpart has 20 000 clients. According to FNB’s Cassius Moeti, it is easier for people to open a Card Wise account because they do not have to produce payslips, which most people do not have due to the nature of their earnings, such as kapana sellers and shebeen operators. The requirements are an ID and N$20. Card Wise comes with a N$2 500 debit card, and a free inContact service, through which clients are informed about the financial transactions of the account. Bank Windhoek said yesterday that since the launch of Easy Save last November, the bank has attracted 20 000 first-time accountholders countrywide. The product, says the bank’s Chief Executive Officer, James Hill, is aimed at the unbanked as there are Namibians who for years have been excluded from the formal baking sector for various reasons, which among others include affordability and access. Just like the other low-cost product, a client does not need a payslip but only an ID to open an account, whose account balance is N$20. Its monthly service fee is N$2 and it also offers its clients free life cover worth N$2500. Clients can also earn interest rates ranging from 1 to 4 percent, depending on the amount of the money in the account. Another product that is low-cost although not necessarily meant for the bottom of the market is Standard Bank’s E-plan account. The bank could not provide the number of clients who have opened these accounts launched a few years back. An SBN official said yesterday that what is most attractive about the account is that it has both a transactional as well as a savings pocket. Requirements for opening the account are N$50 for adults and N$20 for children plus ID. Last year, Deputy Minister of Finance Tjekero Tweya said bank charges revealed very important aspects about the banking sector and the specific institutions as they reflect the level of competition in the sector. 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 Namibia’s situation, there are few players in the market, he complained. Although, the banking sector has grown significantly with its assets increasing by over 100% in nominal terms between 1998 and 2003, Tweya said such growth did not result in improved competition partly because of mergers and acquisition of institutions, a situation which affected concentration in the industry and could have further eroded competition in the sector. Tweya said the consequences of few banks dominating the market was an oligopolistic situation, with the resultant high bank charges and wider interest margins. He maintained that available information confirms that Namibia’s bank charges are amongst the highest in the region. He also alleged that available information reveal that the country’s banks depend more and more on such charges for their profitability, with some banks deriving up to 50 % of their income from charges.