Michael Mambo Mukete: Role of the Bank of Namibia in consumer
protection issues
Speech by Mr Michael Mambo Mukete, Assistant Governor of the Bank of Namibia, at the
launch of Namibia Consumer Trust, Windhoek, 15 March 2011.
* * *
Director of Ceremonies, and the Executive Director of Namibia Trust - Mr Michael Gawaseb,
The Chairperson of Namibia Consumer Trust - Mr Sandi Tjarondo,
The Board of Trustees of Consumer Rights Trust,
Distinguished Invited Guests,
Members of the Media,
Ladies and Gentlemen,
It is my great pleasure to be here today to witness the launch of Namibia Consumer Trust.
My research indicates that this Trust is the first of its kind set up to advocate for the rights of
consumers in Namibia. The launch comes at the most opportune time when many Namibians
are finding themselves without appropriate avenues to find redress when their rights are
infringed and often feel powerless to stand up against giants in the business and the financial
sector.
It is with this view in mind that the Bank of Namibia regards this initiative as a welcomed
development at a time when concerted efforts are made to assess the regulatory landscape
for consumer protection measures. This is because there are dozens pieces of laws
developed many decades ago, and most of them surely have outlived their usefulness. It will
therefore take much determined effort and coordination not only from the audience in this
room, but also across sectoral regulators and Government Institutions to address the
inefficacies in our existing laws. It is worth noting that the Law Reform And Development
Commission has already issued public invitation to this effect and I wish to urge you all to
participate in this indispensable exercise.
Director of ceremonies, Ladies and gentlemen
Allow me to ask a very rhetoric question,
why should Financial Regulators be concerned
about the right of consumers of financial services?
Lack of information - or "information asymmetry" between consumers and Financial Services
Providers places customers at a disadvantage. Consumer protection therefore seeks to level
the playing field between suppliers and consumers of financial services. Financial services
are in fact often complicated, while often involving large amounts of money for individuals. It
is true that the need for consumer protection is not unique to the financial area.
Nevertheless, there is a considerable difference in degree compared with most other
areas, partly because it is often difficult even with hindsight to assess the quality of
the financial services.
In the Namibian case, the challenge we are facing is not only to protect the existing
customers, but we need to put more effort in bringing the estimated 51% of the population
excluded from the mainstream of financial services. It is against that background, that the
Bank of Namibia has recognized the need to advocate for financial inclusion as one of its
new key strategic focus. Director of Ceremonies, empirical research reveals that financial
exclusion allied phenomenon are amongst others; lack of financial education, lack of
consumer protection and therefore, financial discrimination; and the lack of suitable products
and services. My speech today will focus mainly on consumer protection as the Ministry of
Finance is going to present our collective strategy on financial literacy.
Director of Ceremonies, Ladies and Gentlemen,
Let me inform you of the role of the Bank of Namibia on consumer protection issues arising
from financial services providers falling within its purview. There are many pieces of
legislations directly administered by the Bank, which have a bearing on consumer protection.
I will highlight them later in my speech when I introduce some of our initiatives and strategies
aimed specifically to consumer of banking services. These laws allow the Bank, to among
others, act as the prudential regulator and supervisor of commercial banks to ensure that
customers' deposits and investments of are safe. Concomitantly, the Bank ensures that
through its banking licensing process only "fit and proper" persons are permitted to own and
manage banking institutions to prevent potential depositors to loose their money from
scrupulous persons.
Director of Ceremonies, I am equally honoured to express myself on some of the current
and future initiatives pursued by the Bank of Namibia in the area of consumer protection.
These include the recent enactment of the Banking Institutions Amendment Act of
2010, which enables the Bank to recommend to the Minister of Finance to issue
regulations on unfair terms in contracts between commercial banks and their
customers. By its very nature, banking services often require that customers enter into
agreements with banks. Sometimes unaware of their rights and without having been afforded
an opportunity to study and agree to certain contractual terms and conditions, customers in
their desperation for services sign these contracts, which in the end bind them for extended
periods. These contracts are at present considered binding on customers, irrespective of
how onerous, unreasonable or unexpected such terms might be.
As a banking regulator, the Bank of Namibia has an interest in encouraging standards
of good banking practices whereby commercial banks act fairly and reasonably in
relation to their customers. It is against this background that in addition to a possible
regulation on unfair terms, the Bank is busy developing Code of Good Banking Practice.
The Code shall set out the banking industry's key commitments and obligations to customers
on standards of practice, disclosure and principles of conduct in relation to banking services.
in terms of the best practices, the Code shall provide that contract
Director of Ceremonies,
between the commercial banks and customers shall have a clear, plain and simple terms, for
the understanding of which no special knowledge is required.
A very good example to draw from is when President Obama signed the new Credit Card Bill
of Rights into law, he challenged the industry to create a simple, easy to understand credit
card agreement that you "don't need a law degree or a magnifying glass to understand." This
means eliminating provisions and confusing terminology used by lawyers for reasons of
tradition or habit, replaces the legalistic with plain-language, and introduces information
design to enhance readability and comprehension. It is thus the intention of the Bank that
contracts should be simple, short, and preferable designed to fit on one or two pages.
The other key aspect of this Code will be to enforce good lending practices by banks
to avoid over-indebtedness. Banks will, therefore, be expected to act in the best interest of
its customers by ensuring that they Know and Understand the customer's needs, only offer
them products and services that are suitable to such needs, and provide them with
information to enable them to make informed choices.
The Code will further require banks to have in place effective complaints handling
procedures and appropriate timelines within which complaints should be dealt with.
This also means that banks will be directed to be the first "port-of-call" to offer redress for
customers, by having dedicated complaints desks to handle customer grievances.
At this juncture I wish to inform you that the Bank of Namibia, together with the Industry, will
issue the said Draft Code of Good Banking Practice, during the course of this year for public
comments. Therefore, Director of Ceremonies, I humbly request the audience present in
this room to spend time and do justice to all consumer protection initiatives, which we
all agree are close to our hearts by providing extensive comments to the Bank on the
Draft Consultative Paper.
Director of Ceremonies, Ladies and Gentlemen, The other initiative being pursued by both
the Bank of Namibia and our sister Regulator, the Namibia Financial Institutions Supervisory
Authority, is the establishment of Financial Services Ombuds Office, in terms of the Draft
Financial Institutions and Markets Bill. This Office will be financed and resourced by the two
institutions. It is expected to serve as an additional mechanism for redress for consumers
who are aggrieved by their financial service providers.
Director of ceremonies, Ladies and Gentlemen
In another attempt to protect the consumers, the Bank of Namibia wish to use this
unique occasion to once again warn the consumers against the persistent
mushrooming of pyramid schemes and related schemes. These types of entities have
started to proliferate in Namibia and ordinary citizens are continuously lured with
unbelievable testimonies of opportunities on how to get themselves out of poverty. The
downside is however, that entire families, households and even pensioners are targeted and
may loose their hard earned cash and suffer at the hands of these schemes. In our efforts to
protect consumer and the general public, the Banking Institutions Amendment Act of 2010
made the participation and operation of such schemes a criminal offence.
Before I conclude, Director of Ceremonies, kindly permit me the opportunity to inform the
audience that in 2010, the Payment System Management Amendment Act was
promulgated giving the Bank the mandate and authority to regulate bank fees and
charges where necessary. Thus, the Act enables the Bank of Namibia to set standards to
protect consumers from being exploited through exorbitant fees and charges.
Chronologically, I am sure the audience will agree that the starting point should be cash
deposit fees which are main barriers for the majority of people wanting to open or maintain
accounts with commercial banks. Accordingly, it is the Bank of Namibia's intention to focus
on cash deposits fees for individuals and SMEs in 2011.The standard will also call for a
compulsory introduction of a low-cost basic retail bank account, which should be treated as
rather than a money making product for commercial banks. It is worth
a public utility
mentioning that some of the commercial banks already have in place a similar account. All
these efforts, Ladies and Gentlemen, have built-in mechanisms geared towards enforcing
consumer protection.
In conclusion, Director of Ceremonies, this initiative by Namibia Consumer Trust certainly
has the potential to become the vehicle for large scale consumer protection initiatives. The
Bank of Namibia is pleased to be associated with the launch of this initiative today. We are
committed to maintaining and enhancing market confidence in a strong, fair and progressive
way, but we cannot do this alone. Regulation is a complex balancing act and it is only
through collaboration with other regulators, the industry and consumers that we can make it
work for the financial system as a whole.
The Bank believes that a strong relationship with the Consumer Trust will enhance the
important role you will play in influencing policy and strategic outcomes. My final message in
this context is, therefore, an invitation to consider how we can support each other and
develop stronger relationships, communicating with consumers together at a grassroots level
to ensure that they are in a position to make informed and confident financial decisions.
I am sure it was long and difficult road to get where you are today, and the launch will
certainly not remove all obstacles on the road ahead. I therefore wish to urge you to continue
working hard towards your objectives of protecting and educating consumers in Namibia of
their rights in all sectors of the economy.
Director of Ceremonies, Ladies and Gentlemen, I thank you for your kind attention.