MP accuses banks of being a ‘mafia’

… 71 homes auctioned off last year

During a heated parliamentary standing committee debate, lawmakers criticised commercial bank executives, accusing them of adopting a profit-driven approach reminiscent of mafia tactics – especially considering high interest rates on loans.

The parliamentary standing committee on economics and public administration yesterday met with representatives from the Bankers Association of Namibia (BAN), Bank Windhoek, FNB Namibia, Nedbank Namibia, and Letshego Namibia.

This was to address public grievances regarding high interest rates and alleged discriminatory practices within the banking sector.

The committee members expressed deep concern about the standard 20-year home loan repayment period for clients, noting this places pressure on borrowers by almost doubling their initial loan, potentially leading to loan defaults over time.

“This turns out to be more expensive. The bank does not encourage housing loans for five years . . . So, the bank is a clear mafia,” Natangwe Ithete, the chairperson of the committee, said.

He said banks easily extend five-year vehicle loans, but no less than 20-year home loans.

In return, bank executives said the 20-year loan repayment period is not meant to generate profit for the bank, but to allow the borrower enough time to repay his or her loan.

“The reality is our people are not happy. Are you, the banks, leaving us with the message that things are okay and we leave it the way it is?” Ithete asked.

Last year, commercial banks put 277 homes up for auction, and 71 homes worth 85,9 million were sold.

The total home loan book stood at N$50 billion as at 31 December 2023, with 68  414 clients being home loan recipients.

The meeting follows a November meeting the committee held with Bank of Namibia governor Johannes !Gawaxab.

The meetings are investigating an earlier motion tabled by member of parliament Veikko Nekundi on “overcharging and the unethical nature of multiple charges by local commercial banks”.

Bank Windhoek managing director Baronice Hans yesterday explained that home loans are products within a bank, adding that the standard repayment period for a home loan is usually 20 years.

“In Britain, it can go up to 40 years. It is simply to make it affordable,” she said.

Hans said while it is difficult for individuals to repay a home loan over five years, it is not prohibited.

“Most banks have different products, and you can prepay your home loan. If you have more money and you want to pay your loan off in five years, by all means go ahead, because it is allowed.

“However, it is excessively difficult for an individual to afford a five-year home loan,” she said.

Nedbank managing director Martha Murorua said some clients pay off their loans in less than 20 years.

“The reason why we put 20 years is to allow you leeway,” she said.

Ester Kali, the chief executive of Letshego, said as much as the role of the parliament is to represent the people, banks also act as intermediaries to those who are borrowing and investing.

“A lot of transformation has happened in the banking sector,” she said.

BAN chief executive Brian Katjaerua said banks play an anchor role in economic growth, employment creation and social transformation, adding that protecting depositors is of paramount importance.

“Deposits fund loans. If loans are not repaid, over time liquidity risk is increased, which is the largest cause of bank failures. Banks are banking businesses that must be run sustainably based on sound commercial practices,” he said.

Katjaerua said the sector is very competitive and therefore market forces continue to drive prices down.

“It is important to encourage customers to honour their financial obligations to promote economic growth and prosperity,” Katjaerua said,” he said.