A conducive operational environment needs to be created for SMEs to flourish.
This was said by Bank of Namibia governor Ipumbu Shiimi during the signing of an agreement with the Development Bank of Namibia cementing their commitment to finance SMEs.
Shiimi said a once-off funding initiative will not make the cuts as various programmes need to be implemented for an ecosystem to exist.
During the signing of the agreement, the central bank committed another N$50 million to the strategy, bringing their total commitment to N$70 million. In 2018, BoN contributed N$20 million towards the operationalisation of the strategy.
"We need to create an ecosystem that helps and supports small and medium enterprises. If we only focus on one end, we may not effectively support SMEs," Shiimi explained.
He said that after their assessment with the Ministry of Finance and the Development Bank of Namibia, they agreed that part of creating a conducive environment for the SMEs is to make funding available.
The funding will be accessed through the credit guarantee scheme, equity financing and business support (mentoring) as part of the SMEs financing strategy.
The country's top banker said the equity financing will bring diversity in SME funding, as small business owners can give part of their companies in exchange of capital and only pay back in dividends, which will give them enough time to pay back.
He said that the country needs to create its own businesses to employ the growing pool of the jobless and revive the economy, and reduce inequality.
Shiimi promised to work with DBN to ensure that SMEs funding is implemented and is delivering on its objectives.
His call comes at a time the SMEs sector is waiting on the Ministry of Finance to pass additional regulations under the Procurement Act, that will allow certain tenders to be reserved specifically for budding enterprises.
The funding strategy will also fill the gap left by the collapsed SME Bank that was meant to provide funding to SMEs at favourable rates and without the need for collateral.
The central bank governor said the credit guarantee scheme will be accessed through commercial banks unlike in the past where small business funding was only limited to the SME Bank.
He elaborated that instead of focusing on the narrow approach and revive the SME Bank - limiting the access to funding in the process - the financing strategy is extended to commercial banks that have branches all over the country.
"We don't think you need a specific institution like the SME Bank with this strategy; what we need is access to finance and you need new infrastructure to deliver that," stated Shiimi.
DBN chief financial officer Hanri Jacobs said the development bank has put all the necessary operational aspects in place for the scheme to work.
Since potential SMEs will be applying through their commercial banks, Jacobs said they are just waiting for the operational legislature to be gazetted by government.
She added the credit guarantee will be accessed early next year, through commercial banks once the regulation is gazetted.
The credit guarantee scheme will cover the collateral for all potential SMEs looking to fund their business expansion or working capital, as opposed to the past where they had to pledge any asset to the commercial banks to get a business loan.
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