The Development Bank of Namibia has opened its SME centre in Windhoek which will bridge the gap in financing left by the closure of the SME Bank.
This was announced by DBN chief executive officer Martin Inkumbi in a statement yesterday where he said the financing function had been extended to the bank's regional offices at Walvis Bay and Ongwediva.
Explaining the financing gap, Inkumbi sDevelopment Bank of Namibiaaid while there is a financing ecosystem for SMEs in the commercial banking sector, there is a national imperative to finance SMEs that have lower levels of collateral availability, but still present a high degree of potential in terms of sustainability of the enterprise in spite of perceived risks.
"Perceptions of risk might emanate from lower collateral availability, but also from establishment in centres with lower population figures, rural areas, and in regions with lower economic activities," he said.
One of the bank's socio-economic purposes is to nurture inclusive economic participation through finance for previously disadvantaged Namibians, including women entrepreneurs. The bank is also using the vehicle of SME finance to foster the interests of younger entrepreneurs, which it sees as the basis for future economic growth.
SMEs are also seen as a mechanism to further develop regions with lower levels of economic activity and provide stimulus in rural areas.
Talking about DBN's SME financing process, Inkumbi said the bank's operation has no relation to the SME Bank. Contrary to speculation, the bank has no intention to operate in the retail banking field, and views itself as a pure development finance institution (DFI).
He said the bank has a long track record of governance and due diligence in the field of SME finance, stretching back to shortly after its inception, and this is now vested in the DBN SME Centre, to provide DBN with greater control in the form of a siloed operation, which due to its nature and relative risk, has intensive diligence requirements.
Previously the bank processed finance for infrastructure and larger enterprises alongside SMEs.
Talking about the day-to-day operation of the SME centre, Inkumbi says that although the output can superficially be seen as finance for SMEs, the operation will be underpinned by several layers of support, particularly in the pre-application phase.
In the pre-application phase, the bank is particularly seeking to draw attention to the process of business planning.
"Without a realistic and achievable business plan, the applicant places herself / himself in a position of financial risk when borrowing," Inkumbi stressed.
To this end, the bank has developed a business plan content guide which will be freely available to potential borrowers. The bank's support will also extend to advising on the completion of applications, and documents and certification required for the application.
"We want our borrowers to have the best possible prospect of success," Inkumbi added.
He described a failed SME as a lost opportunity cost to the bank, as that capital might have been directed to a different SME which might have flourished. This, he continued, is a matter of the need to preserve the bank's sustainability.
Once the completed application form, business plan and set of documentation are submitted, the due diligence can proceed, after which the bank will give a response to the application.
Once the loan agreement has been concluded, Inkumbi says, the bank will engage in rigorous monitoring to identify borrowers who run into difficulty, and provide corrective support if needed.
In closing, Inkumbi urges applicants to give their best during the planning and application phase. He said DBN is a bank 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.