The establishment of SME Centre by the Development Bank of Namibia in Windhoek, with extended services in Walvis Bay and Ongwendiva, has come to represent the dawn of a new era with respect to small and medium-sized enterprises (SMEs) financing in Namibia.
The Development Bank of Namibia (DBN) with assistance by the Bank of Namibia (BoN) stepped in to bridge the gap in small business financing that was left following the liquidation of SME Bank in 2017.
DBN Chief Executive Officer Martin Inkumbi has it that, while there is a financing ecosystem for SMEs in the commercial banking sector, there is a need to finance small businesses that lack collateral, but still present a high degree of potential in terms of sustainability of the enterprise in spite of the perceived risk.
Perceptions of risk, he says, might emanate from lower collateral availability, but also from the establishment in centers with lower population, rural areas and in regions with lower economic activities.
One of DBN’s mandate is to nurture inclusive economic participation through the financing of previously disadvantaged Namibians, including women entrepreneurs.
The bank uses SME finance to foster the interests of younger entrepreneurs, which it considers as the basis for the future Namibian economy.
Small businesses are also a mechanism to further develop regions with lower levels of economic activities and provide stimulus in rural areas.
DBN defines SMEs as enterprises that have an annual turnover of not more than N$10 million.
The operation of SME Centre is underpinned by several layers of support, particularly in the pre-application phase.
In the pre-application phase, the bank particularly seeks to draw attention to the process of business planning.
Without a realistic and achievable business plan, Inkumbi stresses, the applicant places herself/himself in a position of financial risk when borrowing.
To this end, DBN has developed a business plan content guide, which is freely available to potential borrowers.
“We want our borrowers to have the best possible prospect of success,” Inkumbi adds.
The bank also works with applicants to develop an understanding of business models, project proposals and enterprise milestones, in order to develop viable financing models that take sustainability, risk, and growth into account.
The normal maximum loan tenure is 5 years and the minimum loan amount is N$150,000 and takes approximately four weeks to process a ‘properly completed’ application.
Once the loan agreement has been concluded, Inkumbi says, they will engage in rigorous monitoring to identify borrowers who run into difficulties and provide corrective support, if justified.
It should be noted that the application process is designed to identify applications with the greatest development impact, including employment creation, economic participation for previously disadvantaged Namibians, operating in regions with low levels of economic activities and innovation.
In addition, DBN stated that it seeks for opportunities to finance enterprises in the fields of transport and logistics, manufacturing and tourism. It has also signaled its intent to provide finance to enterprises that address the shortage of affordable land and housing, and generation of electricity.
Based on historical trends, the DBN expects high demand for asset finance and short-term loans for start-ups and expansion. It also avails operating capital, contract-based finance, and performance guarantees.
In closing, Inkumbi urges applicants to give their best during the planning and application phase, adding that DBN is an institution that seeks excellence. “When borrowers succeed in their enterprise endeavours, the Bank has succeeded in its endeavour to assist them, and to develop the nation,” he said.
In November 2018, DBN and the Bank of Namibia (BoN) signed an agreement on the operationalisation of the Small and Medium Enterprise Financing Strategy.
The strategy that was approved by Cabinet, comprises of three interlinked facilities – Mentoring and Coaching Programme, Credit Guarantee Scheme and the Venture Capital Fund with BoN announcing a grant of N$20 million to the scheme, meant to fill the gap left by the collapse of the SME Bank.