Outdated legislation hinders financial sector innovation- NAMFISA CEO

Hertta- Maria Amutenja

Chief Executive Officer of Namibia Financial Institutions Supervisory Authority (NAMFISA), Kenneth Matomola, has highlighted that the outdated legislation is hindering financial sector innovation.

 This assertion stems from the Parliamentary Standing Committee on Economics and Public Administration’s report on the stakeholder’s consultative and oversight workshop on the Financial Institution and Markets Act (FIMA) held last year.

The report sheds light on the regulatory challenges facing the non-banking financial institution (NBFI) sector.

According to the report, various stakeholders in the financial sector raised concerns, urging a reconsideration of certain clauses within the legislation. 

 “NAMFISA therefore indicated that the current legislation is outdated, mostly developed in the 1950/60s and they are compliance driven. Hence. NAMFISA does not have adequate supervisory and enforcement powers and tools,” read the report.

NAMFISA emphasised the urgent need for legislative updates, noting that current laws are outdated, compliance-driven, and lack adequate supervisory powers and enforcement tools.

The report further underscored concerns regarding outdated legislation that fails to encourage innovation, technology adaptation and entrepreneurship. Additionally, the current legal framework fails to regulate market conduct and ensure consumer protection, as evidenced by the number of complaints lodged in 2022, totaling 730 complaints.

The report also highlights a clause introduced by FIMA, requiring 75 percent of retirement funds to be preserved until the age of 55, seeming contradictory to the Pension Fund Act, which allows members to withdraw one-third or all of their pension benefit upon retirement. 

“ When exiting the fund, members will only have access to 25 percent of the accumulated benefits and not full access to accumulated benefits, hence, the remaining 75 percent can only be accessed once a member attains the age of 55 years. This means, even if a member would be in a dire need of funds to cater for their day-to-day living expenses, they cannot be allowed to access these funds,” read the report. 

Furthermore, the report mentions the CEO’s reference to concerns raised by the International Monetary Fund (IMF) during the 2017 Financial Sector Assessment Program (FSAP) visit, pointing out the ineffectiveness of regulation and supervision in the Namibian financial sector.

Concerns were also raised about the excessive fines imposed by FIMA on trustees, principal officers, and regulated service providers, questioning their ability to comply with professional standards and navigate the regulatory landscape effectively.

“Fines within such legislation are excessive for Boards of Trustees, Principal Officers and Regulated Service providers, while these members may not have the broad and sufficient knowledge to govern and manage the pension funds. FIMA is inconsistent with the Income Tax Act regarding the existence of Provident Funds, as FIMA under the new definitions excludes provident funds which provide for lump sum payments at retirement,” stated the report.

In response to these concerns, the committee has proposed several recommendations.

These include calling for a thorough review and consultation on FIMA by the National Assembly and reconsideration of the pension preservation clause. Additionally, stakeholders have expressed apprehensions regarding the alignment of FIMA with existing legislation, particularly the Income Tax Act.”

Related Posts