From Sandboxes to Sunbird: Namibia’s Central Bank on Building Namibia’s Fintech Frontier | The CXO Conversations

Guest:

• Valeria MBango, Director of Strategy, Projects, and Transformation, Bank of Namibia
• Tuna Brock, Principal Innovation Hub Officer, Bank of Namibia

Host: Matteo Rizzi, Investor, Co-founder, FTS Group

Full Transcript

[00:00:00] Matteo Rizzi: Hey guys! Welcome to a very special Breaking Banks Europe episode. I'm Matteo Rizzi the executive producer of the show, and here we are at the Singapore FinTech Festival. The show today is powered by our very own SFF podcast, the CXO conversation. And as far as the Breaking Banks format is concerned, today the ecosystem is thriving, with a very special one, an amazing one with Namibia.

I'm here with Valeria MBango and Tuna Brock from the Central Bank of Namibia. Valeria, Tuna, welcome to Breaking Banks Europe.

[00:00:46] Valeria Mbango: Thank you so much for having us.

[00:00:48] Tuna Brock: Thank you. Happy to be here.

[00:00:49] Matteo Rizzi: Let's start with the usual couple of minutes. Introductions? Valeria. You want to start and tell us who you are and what you do at Central Bank of Namibia?

[00:00:58] Valeria Mbango: My name is Valeria Mbango. I am the director responsible for strategy, projects and transformation. We are relatively a new function within the bank. We were established around three years ago, and to a large extent, and I think relevant for this conversation. We are facilitating digital transformation for the banks and we are very excited to have gone through that process.

[00:01:21] Tuna Brock: My name is Tuna Brock. I am the principal Innovation Hub Officer. I recently joined the bank. Prior to joining the bank, I'm from the FinTech ecosystem. And I think the bank with its commitment to innovation, wanted to bring an outsider with a different lens to shake things up a bit.

[00:01:41] Matteo Rizzi: I'm super excited about this conversation because I believe this is roughly the 30th country that we explore. So even if our podcast is called Breaking Banks Europe, we like to extend our remit in showing different FinTech ecosystems around the world. You know how fond I'm of, all the editors, know how fond I am about Africa.

So whenever I can shed lights on an African ecosystem, I'm thrilled. Let's dig into it. Valeria, whenever I think about Namibia, I think about beautiful landscape, natural resources and wildlife but maybe not FinTech.

[00:02:22] Valeria Mbango: Yeah.

[00:02:22] Matteo Rizzi: I would be curious to understand. When in the Namibia, when this whole movement started, you as a central bank, of course you realize, the need to imcorporate both financial inclusion and digitization of financial services. Tell us a little bit about the genesis.

[00:02:42] Valeria Mbango: So I think there's probably been movements already, I would say from the 2010s or so. But I think in pockets, and I think generally even until this stage, our FinTech ecosystem is quite nascent. But I think from a regulator perspective, we are interested in the perspective of using FinTech to help advance some of our own policy objectives around financial inclusion, for example, as well as modernizing the financial system in general. So what we have tried to do in 2021, the bank put in place a FinTech innovation framework, and that was really aimed at ensuring that people with these financial technology or business models that are not supported by our current regulatory framework that they sell whole for them within the Central Bank. And through the innovation hub, we have been operationalizing that.

we have received a number of applications since 2021. And we are very excited. we have had one admission in the recent months and we will essentially be handholding them and just understanding how their technology works, through our sandbox. And we have defined certain parameters within which they'll be operating. And the whole idea is that after a certain period of time, six months to be specific, we are then in a position to be able to admit them into the financial system where they will be adding innovative products to complement what we already have in our ecosystem.

To a large extent, I would also say that within the financial system, a lot of fintechs are mostly focusing on payment and enabling payment type of services in the wallets and they are quite popular. Even the admission that we have recently had, it's about innovating around the wallet solutions and enabling a solution that allows people to earn interest by pulling funds from their wallets which is something new and which is something that we don't have.

And that's what we really want to do to facilitate and be a catalyst in terms of availing innovative solution within the market for the benefit of Namibian people.

[00:04:46] Matteo Rizzi: Tuna. You were from the FinTech space. You mentioned?

[00:04:49] Tuna Brock: Yes.

[00:04:49] Matteo Rizzi: So today, if I am a FinTech entrepreneur in Namibia. Where do I go? What are my options?

[00:04:57] Tuna Brock: So in Namibia, we do have quite a few startups themselves and we're offering incubation programs and accelerator programs. A lot of them are focusing more on the startup phase with a few in the scale up phase. I think we need a little bit more in the scale up phase.

So a number of entrepreneurs, when they enter the country, this is where they would go and get directed and assisted. So there are quite a few programs that are available and we're also establishing relationships with these various organizations that offer that so that we have this complete chain from entering the market as a startup, scaling up until you're ready to enter the regulatory space. So yeah, there's a lot of very passionate Namibians who really wanna drive the startup scene and support Namibians and foreign investors to come in and. Get things moving.

[00:05:55] Valeria Mbango: Last year, if not the year before that, I think we are just starting to create this function, starting to focus and create an enabling environment within the central bank for FinTech. We did a survey with one of the local fintechs actually, in collaboration with them to try and understand from FinTech companies, 'What are some of their challenges?' And so forth.

And one of the things that came out to a large extent was around financing. And of course, we are a central bank and we don't have money to give to people. But I think what also came out of that whole exercise for us is we realized that we need to, within the confines of our mandate of course, and always make sure that it's aligned to the objectives of the bank.

But we feel that we have a responsibility and we are really working on trying to see, as a central bank, how do we help develop the FinTech ecosystem? we have done a lot of benchmarking just in terms of other jurisdictions. For example, last year we did a benchmarking with the Central Bank of Egypt and we have seen how they've really played a role in developing the FinTech ecosystem. While we don't have much money, how can we create strategic partnerships to link fintechs (companies), for example, to funders who are interested in that space. So we really want to play a more active role by looking at the ecosystem as a whole and looking at how we, as a central bank, can add value in terms of that. To that extent, we are also exploring a partnership with GFTN. So, we have also been engaging them to see how can we partner with them? How can they help us understand our FinTech ecosystem better and how do they help us add value? And how do we partner with relevant people to develop that?

Because at the end of the day, we want to regulate fintechs, but if there are no fintechs that are getting to that level for regulation. Then, it serves no purpose. So we really want to make sure that we are just supporting as much and as relevant as we can.

[00:07:53] Matteo Rizzi: Valeria. Adding to what you just said. As a central bank, by definition, at the center of a number of conversations with the actual financial institutions of the country. Whether there are like local branches of international banks or pure local institutions.

They of course, and this is almost a traditional questions that I always ask when you do an ecosystem zoom-in. How do you see, not the role, but the mindset advancement, for banks as far as FinTech is concerned. Because the reason why I'm asking the question is because they might be seen as a threat. The fintechs at the beginning. But very soon they ended up in a collaboration framework because they clearly need each other, right?

[00:08:40] Valeria Mbango: Yeah.

[00:08:40] Matteo Rizzi: So the banks need the status of a fintech and maybe the faster approach to market. On the other hand, startup need banks because of the liquidity, the capital, the customer reach, the security, et cetera. So where do you think is the course or of this conversation?

[00:09:00] Valeria Mbango: In the past, and maybe even still today, they can be seen as threats for sure. But I think what we have also observed within Namibia is that there's a lot of collaboration that is happening now because I think digital transformation is happening.

And typically, the banks have a lot of legacy systems. And those type of setups are very hard to adopt from a technology perspective. It takes a lot, it's costly and so forth. So it makes sense, at least from my perspective to partner so that you can be able to adopt quickly. We have seen some banks who have partnered with fintechs to enable wallet solutions.

And I think that works well and more is happening. However, I think there's still pockets of big banks (that is not partnering fintech companies). I think in some cases, it may even be the experience of fintechs, at least from the conversations that we have had, that it's difficult for them to find partnerships with banks.

But I think there are some banks who are partnering and we are seeing how they're able to leapfrog and be leaders in provision of like wallet services, for example. So I think it makes sense to partner. I've worked in a commercial bank before and I know how big system setups are in there, and to turn that thing around takes much more time. Whereas FinTech offers the opportunity for more agility. So that would be my take on that.

[00:10:16] Matteo Rizzi: The next topic I wanna talk about is strictly related to what we just talked about. The talent one. And the reason why I wanna dig into the topic is that, it's all about people.

[00:10:29] Tuna Brock: Yeah.

[00:10:29] Matteo Rizzi: At the end of the day, sometimes it takes one person with the right drive to change the perspective of a whole institutions. Right? I know there are, several programs and one has been launched yesterday. And maybe Valeria wants to comment about it? I would like to understand the entrepreneurship culture in the country. Do you think that there is enough exposure, for young talents to the FinTech space? To the FinTech solutions? The program you launch is about AI. Right?

[00:11:03] Valeria Mbango: Yeah. We have partnered with one of the local universities, NUST. And yesterday, our deputy governor inaugurated, what we are abbreviating as AIRA, it's Artificial Intelligence and Robotics Accelerator, which is a lab that the bank has essentially sponsored and we are partnering with that local university (NUST).

And that is to facilitate training in new tech areas like Artificial intelligence, Robotics Process Automation and so forth. So that we have that type of skillset for the benefit of the country. Being on a digital transformation journey ourselves as a regulator, we have had to enable or build that capability within the central bank because previously, we would need to outsource these services or get that skill set from vendors, which is unsustainable and it's very costly. And as part of our current strategy, which just ended actually, we wanted to digitally transform the bank. We wanted to modernize the financial system as well as facilitate economic recovery.

In terms of digitally transforming the bank in-house, we have done a lot in terms of automating our own processes, using our data to inform our decisions and putting it in the right format so that we can add value to it. And we have found that in some cases it was quite challenging to find the right talent with the right skill and with the right exposure in terms of having worked with that. But I think we have done well to build that capability.

For the first time, we have data scientists within the bank. We always had developers but we have more now just because of the demand in terms of the type of developments that we have to do.

We have machine learning engineers and data engineers. But it's not an easy skill to come across. We want to collaborate with the academia essentially to make sure that we are building that type of skill for the country.

[00:12:58] Matteo Rizzi: What about the non-technical skills, like entrepreneurship skills? Do you have some sort of framework? If I am an entrepreneur in that country, I can learn how to build a company and how to bootstrap. Very basic soft skills for entrepreneurs.

[00:13:14] Tuna Brock: Within the Central Bank itself, I don't think we have this framework in place yet. But we do have a department that's very dedicated to working with the youth - our strategic communications department. They're very invested in the youth. And I think very much developing (in them) all sorts of skills including entrepreneurship within the Namibian ecosystem.

So our accelerators and all these other hubs, they're also very much invested in helping these entrepreneurs build a business case. Learning how to even just present. I think that's always the biggest one where people have these very brilliant ideas but they do not know how to pitch it.

There was actually one fintech (company) that presented and afterwards, I spoke to them. I said, "This is how you present."

[00:13:59] Matteo Rizzi: By the way, that's the reason why our listeners and know it well. That's why I built Timepledge four years ago because I realized that, although sometimes the ideas were brilliant, they were badly presented because being able to tell a story is a skill. By the way I think Namibia is going to be one of the next destinations of a time pledge mission. I want to go and explore the ecosystem there.

[00:14:23] Tuna Brock: We appreciate your visit and see what we can do.

[00:14:26] Matteo Rizzi: I'm super happy that we met by accident because I was actually listening to Valeria in the Insights forum. I made the connection because, I also have a GFTN hat in my work then I said, "Okay, maybe there is there is something to discover and I'm now in this conversation with you guys, listening about this new ecosystem. So we talked about talent. Let's talk about investments. I suspect, as an experience in the VC, I know that Namibia is not exactly in the radar of big venture capitalist. Right? I get it. Usually when there is a nascent ecosystem, the way to approach it is that you have a private investor that maybe does some angel or seed funding. And then, for the best ideas that are bigger than FinTech, maybe they're just tech ideas still. Maybe the ones that are getting more traction, they get visibility from investors in neighbouring countries from South Africa, for example. Usually there is a nearby ecosystem which is more mature and because of the adjacency, there is a contamination of investments. Is that what's happening in Namibia?

[00:15:42] Tuna Brock: Good question. I think there is a angel investor. I don't wanna call it committee. It's a network. It does exist. How visible they are to the startup ecosystem. I'm not too sure on that. I know last week I saw on LinkedIn, there was some other seed funding that was launched in Namibian. It was driven by a Namibian.

[00:16:03] Matteo Rizzi: Is there an event, by the way? Is that an FinTech event in Namibia?

[00:16:06] Tuna Brock: A finTech event?

[00:16:08] Valeria Mbango: No.

[00:16:08] Matteo Rizzi: Is there any conference or something? Is that a tech forum or any event that talk about Tech or FinTech in the country?

[00:16:16] Tuna Brock: I think there's effort for it and it happens in small pockets.

[00:16:19] Valeria Mbango: Yeah, I would say so. But nothing big or as grand as the FinTech festival here, for example. Yes, but I think there are smaller events.

we have tried to get fintechs together just for conversation and to understand their needs. But I can't think of a big flagship event around that.

[00:16:36] Matteo Rizzi: The reason why I'm asking is because it's almost like a storytelling exercise but last week there was a Guinea FinTech week. And Guinea is actually much smaller than Namibia, in terms of surface, it is probably 1/10th (of Namibia) . But they do tap on the neighboring countries. Even if it is a very small ecosystem, they decided to dedicate one week to FinTech and becomes like the center of expertise for all the small countries around Guinea. Maybe that's an idea for you guys.

Because sometimes, as I was saying. You are in terms of mindset, one of the most progressive central bankers, I've ever talked with, in Africa.

[00:17:22] Valeria Mbango: Thank you.

[00:17:22] Matteo Rizzi: And the fact that we are here talking. Simply the fact that you are here at the Singapore FinTech Festival, coming from 15,000 miles, to talk about your own ecosystem and to me. Is a sign of a very progressive mindset.

I think that the challenge is, and if you agree with me that. You need to find your own sweet spot and specialise in something. It could be CBDC to AI to Wallet as a Service. Whatever that is. But that's a challenge, right?

No startup will make enough money to be interesting for a venture capitalist if they only do business in Namibia. But also I think that there is a chance for each country to find its own sweet spot. I don't know if you agree. Valeria?

[00:18:11] Valeria Mbango: Yeah, I would agree with that. Actually, when you were talking about that. There's a number of initiatives that the bank is working on as well. Maybe we can touch on that a little bit later. But one of the things that comes to mind is the size of our country. And I think to some extent it could be a limitation. We are a country of 3 million people. In term of engaging the banks, for example, payments, they always say payments is a volumes game. And there's only so much volumes. But I don't think that it means that there's no opportunity for FinTech. But I think that it is probably one of the limitations for FinTech currently. I don't know if that's a good perspective or the way to look at it, but I think it, we need to have more opportunity because I think there's always an opportunity to offer something, especially when you start to innovate. I think there could always be a space for FinTech, and I think that's what we are trying to encourage and develop.

[00:19:06] Tuna Brock: Yeah, I agree with that. And I think because we are so small, we can't have siloed efforts. Which I think is the current (mode of operating).

I see there is mobilisation for combined efforts. I think in the next few years, we can see change and I think that's definitely something I want to drive.

Let's not compete with each other because you only take a hundred thousand customers. What can you do with that? Let's get together, let's share ideas and let's support one another.

[00:19:31] Matteo Rizzi: Talking about possible niches. You're not engaging your institution in answering to this question, but we were talking about embedded finance earlier on, right?

Tomorrow, I'm moderating a panel on FinTech and Tourism. When you think of possibilities, you think of the travel industry even there in terms of insurance packages, mobile payments, Buy now, pay later, you name it.

Maybe tourism is one of the big revenue streams of the country. Maybe there is a way to showcase (FinTech in tourism) . Because you have so many players in the tourist space, in the country. Maybe there is a way to showcase embedded finance in the tourism sector. FinTech for tourism and it could be a showcase for that.

[00:20:20] Tuna Brock: Yeah because that takes our (transaction) volume up. That we are maybe not considering when it comes to fintechs.

[00:20:26] Matteo Rizzi: Exactly right.

[00:20:27] Valeria Mbango: I haven't particularly seen any fintechs making that connection, but I think it's definitely a good idea because you are right in that tourism is one of the biggest sectors and contributors to our GDP. And so there are definitely a lot of people visiting the country, but I have not come across any FinTech solutions that sort of make that link.

[00:20:46] Matteo Rizzi: So Valeria before we wrap up. What are some of the digital transformation projects that Bank of Namibia has been involved in launching that you wanna share with us?

[00:21:00] Valeria Mbango: I think there's been quite a number of projects, especially within our current strategic period, particularly around digital transformation because it was a key strategic objective for us.

we have put in place RegTech for regulation. A solution that sort of gets data real time. Sorry, not real time. We are aiming for real time now. But in a structured format from banks and we use that information for regulation purposes.

I think that has been quite a huge success for the bank. we have also partnered with a revenue collection authority in Namibia to match financial transactions with import and export data so that we make sure that there's no illicit financial flows. There's no under or over declaration of goods.

[00:21:45] Matteo Rizzi: I'm aware of the problem. Very smart.

[00:21:47] Valeria Mbango: Yes, and I think we are continuing to do that. We have in April, launched a very exciting project for the bank. It is about facilitating financial inclusion, where we have procured an instant payment solution platform for the banking institution. That was quite special because I think while we have quite a high financial inclusion rate in Namibia, it's still standing at 78.1%.

We recognize that it's good and we have a very robust financial system. But we don't feel that it serves the rural areas, the remote informal part of our economy, and therefore we have procured that. The bank is making that investment and we are availing that solution to the industry.

They would need to plug in and we are leveraging platform technology to do that so that we can achieve financial inclusion and facilitate interoperability within the market, which is quite key for us. We are exploring CBDC for the central bank, and we really want to have a digital representation of our fiat currency.

We are at very early stages of that. And we have just concluded a technical assistance mission with the IMF. And through that process, we have collaborated and we have developed a short, medium and long-term strategy around that. We have also taken our key stakeholders along. We have put out a consultation paper late last year.

We got some good feedback that we basically be onboarding as we design and discover whether there's desirability around CBDC, particularly for the Namibian ecosystem. We also form a common monetary area together with South Africa, Lesotho, as well as Eswatini. From a cross border perspective, we are also exploring whether CBDC has a role to play and can help us achieve more efficient processes, better pricing around cross-border payments in the Sub-Saharan Africa region.

In particular, the cost of cross-border payments is quite high. So through a project that we are calling Project Sunbird, we are also collaborating within the CMA to try and understand what is the opportunity for CBDC. And we are actually preparing to put out a diagnostic report just looking at other payment modernization initiatives that are already happening and trying to see, ' Is there still an opportunity?' Are the persisting gaps that CBDC, for example, could still play a role? We are quite excited. There's a number of other initiatives but those are the ones that are just highlight.

[00:24:12] Matteo Rizzi: As you can see, guys. There is a lot of activities and I think I was right when I said that bank of Namibia, at least in terms of mindset, and openness is quite forward. So I congratulate you.

[00:24:24] Tuna Brock: Thank you.

[00:24:24] Valeria Mbango: Thank you.

[00:24:24] Matteo Rizzi: So our time is up. Thank you very much for being with us. And for the very first time, spend some time with Breaking Banks. Thank you very much.

[00:24:34] Tuna Brock: Thank you.

[00:24:35] Valeria Mbango: Thank you so much.

[00:24:36] Matteo Rizzi: And as far as BBE at the Singapore FinTech Festival, powered by The CXO conversation, that's a wrap.