7 November 2018

Namibia: Central Bank Avails N$20 Million for SMEs

Windhoek — Following the small business financing void left by the demise of the now defunct SME Bank, the Bank of Namibia (BoN) has stepped in to assist the Development Bank of Namibia (DBN) to service this crucial sector of the economy.

To this end, BoN yesterday provided DBN with a N$20 million grant to operationalise the SME Financing Strategy, which originated from the Namibia Financial Sector Strategy (NFSS) aimed at addressing limited access to finance and support services for local SMEs.

Approved by Cabinet in June, the strategy comprises of three interlinked facilities, namely a mentoring and coaching programme, credit guarantee scheme and the venture capital fund.

The two institutions also signed a memorandum of agreement (MoA) in relation to the utilisation of the funds.

"The cornerstone of this MoA is to ensure that the funds are utilised for its intended purpose, which is assisting SMEs through the facilities under the SME Financing Strategy," said BoN Governor Iipumpu Shiimi.

Shiimi noted that BoN, as secretariat and coordinator of the NFSS, is determined to support the efforts of DBN in preparing for the establishment of facilities under the SME Financing Strategy.

"As an institution mandated to spearhead government's efforts in providing access to finance for SMEs, the Development Bank of Namibia welcomes this financial support from the Bank of Namibia. The DBN has already commenced preparing for the implementation of the strategy, which it will introduce in stages depending on funding availability. The public and targeted beneficiaries will be duly informed once all modalities have been put in place," read a statement from the two institutions.

DBN will manage the credit guarantee scheme and the venture capital fund for SMEs. The development bank intends to manage the funds off balance sheet and as independent legal entities.

The SME Financing Strategy has been identified as one of the priority areas in the Harambee Prosperity Plan, the National Development Plan and Vision 2030.

Shiimi explained that these facilities are complimentary as they serve SMEs at different stages of growth and maturity.

"SMEs have the potential to contribute significantly to economic growth, employment creation and poverty alleviation. The sector however, faces numerous challenges including inadequate capacity and limited access to finance. It is therefore important that this sector is supported in order for it to optimally contribute to Namibia's socio-economic development. The SME Financing Strategy thus aims to ensure that multiple challenges are addressed in a targeted and effective manner," Shiimi stated.

DBN CEO Martin Inkumbi clarified that the mentoring and coaching programme is designed to enhance business and financial management for enterprises to effectively and efficiently manage their businesses.

He further noted that improved business and financial management in turn increases the SMEs ability to access finance from lending institutions which in turn enables the businesses to grow and contribute to socio-economic growth.

"Building on capacity development through the mentoring and coaching programme, the credit guarantee scheme will ensure that bankable SMEs that require debt financing but lack collateral are able to get loans from lending institutions. This is done through a shared risk arrangement between the government, lending institutions and the borrowers," Inkumbi stated.

He added that during any businesses lifespan, a time comes when expansion and growth is considered which will require more than debt financing and will need direct investment in the form of equity.

"That's where the venture capital fund comes in which is intended to grow selected high-potential companies into new industrial leaders of Namibia. The fund will spur innovative products and services that have the potential to create employment and grow the economy sustainably."

In accordance with the Cabinet directive, the SME Financing Strategy is being spearheaded by the Ministry of Finance, the custodian of the NFSS. The Ministry of Finance has further delegated the administration of the facilities under this Strategy to DBN.

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