Financial Institution Fraud Reaches Alarming Levels in Namibia
Namibia has experienced a staggering surge in financial institution fraud cases, with a total of 357 reported incidents resulting in losses amounting to N$26.3 million in 2023.
Categories of Fraud
The categories of fraud experienced by banking institutions in 2023 included:
- ATM fraud
- Electronic fund transfers
- Credit and debit card fraud
- Mobile application fraud
- Theft of cash
A total of N$27.2 million was lost to these fraudulent activities, but the banking sector has managed to recover N$4.8 million of the losses.
Concerns Over Fraudulent Activities
Finance and Public Enterprises Deputy Minister Maureen Hinda-Mbuende expressed concern over the issue, noting that internal and external negligence may be contributing factors to the fraud. She questioned whether there are relief measures in place for individual clients who have suffered as a result of these fraudulent activities.
Illicit Financial Flows
Preliminary estimates from United Nations studies suggest that Namibia has experienced inward illicit financial flows of N$19.6 billion and outward illicit financial flows of $4.7 billion between 2018 and 2020. Hinda-Mbuende emphasized the need for concerted efforts to curb these flows and bolster cybersecurity defenses to safeguard the integrity of the financial system.
Banking Sector Performance
Despite the worrying fraud trends, the Bank of Namibia reported a solid profitability in the banking sector, with an income of N$12.8 billion and net income after tax increasing by 24.5% to N$3.7 billion. The growth is attributed to higher interest rates introduced in 2022 and early 2023.
Risks and Challenges
However, Hinda-Mbuende warned against further interest rate hikes, citing the risk of borrowers defaulting on loans, particularly mortgages which account for more than half of the total private sector credit extension. She highlighted that a large portion of commercial banks’ loans are mortgages, making them highly exposed to mortgage risk.
Non-performing loans have increased by N$456 million to N$6.5 billion, with over 50% of this increase attributed to the mortgage loan category. Hinda-Mbuende emphasized that credit risk remains a key financial risk factor for the banking sector.
Additional Concerns
The Bank of Namibia’s spokesperson, Kazembire Zemburuka, expressed concerns about climate change, greylisting, and cybersecurity risks affecting the banking sector. Despite these challenges, non-banking financial institutions (NBFIs) reported positive investments in 2023.
In conclusion, while the banking sector has shown resilience, there are still significant concerns over fraudulent activities, illicit financial flows, and other risks that need to be addressed to ensure the integrity of the financial system.