Pension funds dominate non-banking sector

The bulk contributed by the other financial corporation’s (OFC’s) to net foreign assets is an indication of the significance of the OFC’s in the Namibian financial sector.

14 October 2020 | Economics

PHILLEPUS UUSIKU

The total assets of other or non-bank financial corporation’s (OFC’s) rose on an annual basis during the second quarter of 2020.

OFC’s include insurance companies, medical aid and pension funds which are regulated by Namibia Financial Institutions Supervisory Fund (NAMFISA).

The total asset value of non-bank financial corporation’s stood at N$185.2 billion at the end of the second quarter of 2020, representing an increase of 5.6% when compared to the second quarter of 2019, this is according to the Bank of Namibia (BoN) quarterly bulletin report.

The absolute size of the pension funds continued to dominate the non-bank financial corporation’s sector with N$122.6 billion of net equity of households, while N$21.0 billion was net equity of households in life assurance at the end of the second quarter of 2020, BoN says.

The net foreign assets of non-bank financial corporation’s rose over the year to the end of the second quarter of 2020. Net foreign assets of non-bank financial corporation’s stood at N$84.9 billion at the end of the second quarter of 2020, lower than the N$95.3 billion registered at the end of the corresponding quarter of 2019, BoN added.

The minimum domestic asset requirements and revaluation of foreign portfolios may have contributed to this reduction.

The total net foreign assets for the financial corporation’s sector as a whole stood at N$129.1 billion at the end of the second quarter of 2020, BoN pointed out.

The fact that the bulk of this amount was contributed by the non-bank financial corporation’s is a further indication of the significance of the non-banking financial institutions in the Namibian financial sector.

Preference

Equities remained the most preferred asset class into which non-bank financial corporation funds were channelled during the second quarter of 2020.

Equities normally provide higher long-term growth and are therefore a preferred investment instrument for non-bank financial corporation’s, despite being relatively volatile. Volatility is referred to variables that fluctuate often.

This followed by interest-bearing securities with a share of 18.2 percent. Cash and deposits were the third asset class where non-bank financial corporation’s funds were channelled during the quarter under review with a share of 7.9 percent, BoN said.

The remaining 10.7 percent was classified as other assets, which comprises of non-financial assets, loans, receivables and financial [email protected]

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