Nam-mic Financial Services Holdings (NFSH) has had a significant growth in profits over the past 5 years, chairman John Shaetonhodi shares his recipe:
In your view, what were NFSH’s major challenges and milestones reached over the past five years?
Establishing the Company NFSH was a huge challenge in itself for us. First, we had to find a credible and reputable partner in the financial sector to work with to set up essential structures, to be able to provide the services we wanted for the client base we were representing.
By entering the business of financial services, we were aiming at extending our footprint beyond the traditional credit products and savings deposit facilities that different types of finance institutions provide at varying degrees.
Our ultimate aim was to find avenues that could facilitate payments, money transfer and remittance services, as well as insurance and contractual savings products for our client base. Payment and savings products are often the most important financial services for low income households. Since its establishment, the NFSH Group has shown sustained growth in an environment that is highly competitive and regulated, building a strong and sound, well capitalised balance sheet.
Going forward, we believe that the continued efficient and effective provision of financial services requires that financial policies and financial system structures should be adjusted as needed, in response to financial innovations and shifts in the broader macroeconomic and institutional environment. As we continue to expand our footprint in the country, we will continue to face major challenges.
These include the degree and quality of access to financial services available to the union membership base, which normally includes low income rural households and their small businesses. There are core issues in the legal and regulatory framework that are not necessarily supporting rural finance and micro-finance.
How do you feel NFSH has evolved since its establishment?
NFSH has registered noticeable growth during the past five years, particularly in the segment of value-added services. The unique collaboration with our business partners in the financial services industry gave the Company its competitive edge.
It has strengthened its asset base as well as its cash flow to become a force to be reckoned with. It has facilitated the creation of products relevant to its client base in the areas of micro lending, insurance, legal access and mobile banking services through sustainable business practices, as well as customised products and services that are integral to our strategic partnership with the Capricorn Investment Holdings Group, Santam Namibia and Sanlam Namibia.
I am proud of what we have achieved in a period of just five years. Guided by increased computing power, we aim to deploy these technologies to increase productivity and create innovative, collaborative networks among our employees, business partners and clients. We trust that Government and regulatory entities will also use these tools to streamline operations, increase efficiency and allow broader constituent participation.
What do you believe makes NFSH different from other BEE companies?
NFSH is unique in its outlook and focus. We are a mass-based organisation created to benefit the workers grouped under a unique labour movement with a history of resistance against workplace exploitation and financial exclusion. The workers we represent in NFSH are mostly used to create wealth for others.
Five years ago, driven by economic opportunities, the workers created their own business arm to venture into the financial services industry to create a new dynamic between companies in the financial services sector, eliminating the habit of these companies ‘pushing’ their product messages to the workers as customers, through traditional broadcasting and publishing channels.
We needed to extend workers’ control in the design of products these workers receive from companies. This necessitated the workers’ company to take part ownership of companies operating in this area and the creation of new ones.
This strategy is aimed at facilitating greater access to sound financial services, thereby addressing financial exclusion head-on. The workers had committed themselves to actively promoting a transformed, vibrant, and globally competitive financial sector that reflects the demo- graphics of Namibia by directing their investment into targeted sectors of the economy.
Workers, most of them deriving from the digital generation, will continue focusing less on physically spending time at a job site and more on getting the job done, thereby creating the work/life balance they desire. With a new decade looming, a range of demographic, economic, social and technology shifts are changing the way we live and operate around the country.
We have noted, for instance, how economic changes over the past few decades have shifted risk and risk management responsibilities to individuals in many countries, including Namibia. This trend is likely to continue over the next decade. We expect companies that our client base works for to further shift responsibility for retirement, career planning and health to employees.
Similarly, government at all levels will reduce social support services. As personal finance will grow more complex, requiring consumers to increasingly understand, anticipate and take responsibility for their monetary decisions and their wellbeing, NFSH will be there to empower the workers to make their independent assessment of products that will better serve their interests.
What is your future outlook for NFSH?
The next decade will see effects of the so-called great recession continuing to reverberate. Regulatory pressures will increase and competition will emerge from traditional competitors and new entrants. These forces will create new business models, fuel industry collaboration and partnerships as well as increase industry consolidation.
Government supervision of the financial services industry is also changing significantly. New regulatory measures being announced will attempt to reduce the risk of future financial crises and ensure consumer protection. Stronger regulation will significantly change financial institution management and reporting, leading to higher costs.
The new environment of increased regulation, new competition and industry change could disrupt the financial services industry. While this is taking place, I believe that NFSH will harness its strengths to extend its direct ownership of equity interests together with control over the voting rights attaching to the equity interests.
Guided by empowerment financing, the Company will continue to invest in targeted and BEE transactions/projects that support economic development in underdeveloped areas where most of its clients hail from.
The future of financial services will further depend on engaging and servicing the new mobile generation, also known as the digital generation – a tech-savvy group of individuals who are being brought up using mobile technologies, Facebook and email. This customer segment has high service expectations and expects to interact with companies that offer goods and services ‘any place, any time’.
They prefer quick, easy and convenient self-service, customised options that are easily accessible, especially via the Internet and mobile devices. Job insecurity, stagnant wages, and declining employer benefits and concerns about the viability of government programmes have the new mobile generation concerned about its financial future.
Facing this uncertainty, this generation will turn to banks and other financial institutions that can provide tools, information, resources and products that can help them navigate their complex financial lives. We at NFSH support the Namibian Financial Sector Strategy to ensure that necessary reforms are implemented to extend benefits derived from this sector to previously disadvantaged Namibians.
The progress in this area is however slow. It is worth noting that the opportunities in this regard cannot be realised, unless our regulatory framework adapts to accommodate the forces of change. Despite significant progress since our independence and democratic governance, the Namibian society remains characterised by racially-based income and social services inequalities. This inhibits the country’s ability to achieve its full economic potential.
In the meantime, we will continue responding to new market opportunities by creating new niches that can be served through variable cost business plans. Real-time production in response to customised demand will be the norm. How to engage and service the new mobile generation as financial members and customers will become a serious challenge.
Financial institutions will have to develop new strategies and technologies for improving account profitability without alienating the digital generation customers. We need to turn these new technologies into insights. Financial institutions not recognising and responding to these new competitors risk losing their best customers.
Players in the financial services industry will continue to be threatened if they do not tackle the challenge of change. These trends will guide NFSH to continue being relevant to all its customers, including the new mobile generation. To be successful, we will have to stand up to the task of offering our clients superior treatment with services tailored to the specific needs of each type of customer.
We need to strengthen Nam- mic Payment Solutions, the company we created for this new mobile generation. The Nam-mic CellCard, a cell phone-based payments service offered by Nam-mic Payment Solutions, will not only dramatically increase the use of electronic banking and commerce, it will transform it. It will facilitate mobile commerce and transactions.
Our success and the very long- term survival of our Group of Companies will require both focus and specialisation to attract and serve profitable customer segments. Through partnerships and collaboration, we as players in the industry will provide the breadth and depth of services our client base requires at an affordable cost.
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