We are on track …but we cannot engineer financial inclusion

By Sibangani Dube
November 2012
Prime Business
The strategic shift of moving from being a small niche player to a full spectrum bank has spurred the growth of Nedbank Namibia to one of the top three performing banks, the CEO, Erastus Hoveka, reveals.

Erastus who took over the leadership of the bank five years ago describes himself as a committed, patriotic Namibian - traits he says have seen him rise in his career as well as on a personal level.

“We have managed to stabilise the bank and build an asset-base through discipline. We continue to be recognised as one of the strongest banks. Our footprint makes us stronger,” he quips.

A couple of years back, Nedbank had only two branches - one in Windhoek and another in Walvis Bay. Both catered mainly for corporate clients.

Today, it has spread to towns such as Outapi, Eenhana, Rundu, Katutura Kuisebmond and Lüderitz.

Plans are underway to add more points across the country in the near future.

“We altered the strategy to say if you want to be successful, you have to be a bank for all. Being a bank for all means, a bank for blacks, women and the underprivileged,” stresses Hoveka.

According to Hoveka, the healthy and sound status of the bank comes after thought-out plans through a process of investing in infrastructure, technology and investing in people to build critical masses that have brought the business to where it is today.

“Since Namibia has a small population, you have to be smart and always on your toes. To compete, you have to go where people are. That’s why (lately) when we do our investments, we take a critical look so as to deploy cost-efficient centres, looking at all channels and of brick and mortar alon,” says Hoveka.

All in all, Hoveka is upbeat about the manner in which banks are managed in Namibia since they have a special responsibility to ensure that they protect the depositors.

More importantly, he singles out the role of the regulator (Bank of Namibia) that he describes as “quite competent.”

“The regulator is always on our backs, making sure that as banks, we keep sufficient capital to ensure we absorb losses. Because the regulatory frame is so conducive, I think banks here have done better than elsewhere in the region,” he emphasises.

Such a move (the omnipresence of the regulator) is imperative in averting risks such as credit, liquidity, market and trading risks.

Of these, the liquidity risk has the most adverse effect on banks.

“What has killed most of the banks around the world from what we know is the liquidity risk. If the depositors come and say ‘we don’t have trust in this institution, so we are taking our money away’, because most of the money is on call, they can come in at any time and do so. If that happened, your bank would close,” he stresses, referring to the happenings in Northern Rock and Lehman Brothers in the USA that have led to their financial meltdown.

Hoveka says they have a number of initiatives through which they share their profits with their clients but the limitation is that they do not publicise them enough.

“We provide convenient access. Within a radius of 5km, you will probably find 28 automatic teller machine (ATMs) from different banks. That access is something one needs to value and cherish,” he says.

Added to that is the funding of various capital projects. “We fund big projects that have spill-over effects; be it energy, water provision or infrastructure in general. This is fuel to the economy,” he adds.

The fact on the ground, as per the FinScope Study of 2011, dispels the accusations Government often levels against commercial banks on their lackadaisical approach in financial inclusion.

“We are committed to the agenda. We are part of the financial inclusion council, totally committed. We see that as part of our social responsibility,” he emphasises.

However, as banks, they face the reality of logistics and distribution costs, which tend to be prohibitive.

According to Hoveka, one cannot engineer financial inclusion - the economics must be there to balance matters.

Furthermore, Nedbank has also heeded the call by the central bank to list on the Namibian Stock Exchange (NSX) but he expresses concern on the lack of depth of the stock market.

“What is really tricky about this is that if you have a stock market that is illiquid (when you don’t buy and sell), having a primary listing requirement does not help you,” he cautions.

Soon, Nedbank will be rolling out the basic account, Nedbank4All, which is more of a free account for clients in a given threshold.Next year, a cash deposit fee will be introduced, which will exempt clients below this threshold from paying fees.

Hoveka is adamant that focus should not be limited to financial inclusion but should rather be cross-cutting to include medical inclusion and many other aspects deemed fit.

The CEO is firmly behind the increase in the localisation of the banking sector. This, he says, is the right thing to do as it would create a class of entrepreneurs who will venture out there and make a success of it.

The question, however is, at what level? Plus, what type of shareholding would follow this kind of arrangement?

According to Hoveka, there is need to look at the practicality, realism, sensitivity, logistics and the time-frame on which to work the issue.

On competition and new entrants in the local banking sector, he admits that while his bank seems healthy, he is concerned that the market will soon be overbanked, thus causing a myriad of problems.

“The biggest challenge is that in a small market like this, the moment the number of players increase, the market will become overbanked, because there will not be enough economics to go around for all of us, so someone will have to eat someone else’s lunch, unfortunately,” he cautions.

The Nedbank boss also worries that the unending world economic turmoil does not augur well for the Namibian economy in various sectors such as fisheries, beef, mining and tourism. The tourism sector already feels the pinch as lodges struggle to survive.

Hoveka, like any other ordinary citizen, is deeply concerned about the level of poverty and the deteriorating level of quality education in Namibia.

These are issues Government should hasten to address before they spiral out of control, he warns.

Constant communication with his staff from end to end, on different touch points through oral and written communication media, ensures he and his team pull in one direction.

All things considered, Hoveka is excited about his daily tasks despite the challenges that accompany them. PF