The Development bank of Namibia (DBN) says it has provided loans of N$297.3 million since it was given back its mandate of funding SMEs with an annual turnover of less than N$15 million, following the collapse of the SME Bank.
“Since April 2017 to June 2019, 218 SMEs have been financed by DBN. A total loan amount of N$297.3 million advanced during this period,” DBN CEO Martin Inkumbi told the Windhoek Observer.
On sector beneficiaries, Inkumbi said the construction sector received 32 percent of the funding, business services at 18.35 percent, commercial property at 11.25 percent, and housing at 10.29 percent, among other sectors.
“During the period from April 2017 to June 2019, SME entrepreneurs in construction received 32 percent of the N$297.3 million advanced during that period and business services (mainly in retail) received 18.35 percent,” he said.
The DBN CEO said N$88 million worth of loans were advanced to businesses in the Khomas region, Oshana receiving N$35.49 million from the N$297.3 million advanced during the period under review.
“Khomas, Oshana and Erongo regions, in that order, have been the main beneficiaries, although finance to SMEs is spread across all 14 regions,” Inkumbi said.
To address concerns by SMEs that accessing funding was a challenge from the bank, he said the DBN had introduced a contract-based finance product, which it attributed to increased funding to the construction sector.
“The DBN’s contract-based finance product, which lowers or eliminates collateral and equity contribution requirements for SME contractors who have secured construction contracts, significantly improves access to finance for SMEs. “We think this product is the reason why DBN’s loans to SME’s in the construction sector continue to make up the largest percentage of the Bank’s loan portfolio to SMEs. This is despite the slowdown of the construction sector over the past three years,” Inkumbi said.
“Further, the Bank has put some SME borrowers on its mentoring and coaching program, especially those who have been struggling to repay their loans, due to what DBN believes is poor business management practices.”
He admitted the economic downturn has had an impact on the ability of SMEs to service their loans, thus the bank has taken measures to cushion its self.
“The Bank has observed a slowdown in demand for loans by SMEs, compared to the years before 2017, but there are still entrepreneurs who see opportunities and are starting new businesses and some are expanding. Secondly, many of the existing SMEs have recorded declining revenues over the past two years, and this compromises their ability to service their loans with the Bank. In these times, one has to balance the urge to increase credit extension and the need to lend responsibly to preserve the financial sustainability of borrowing enterprises and indirectly the Bank as well,” he said.
“I think the economic downturn’s negative impact has been more profound on SMEs. Quite a number of SMEs have adjusted their business models, focusing on specific products and services only, reducing expenditures, etc. DBN has and will continue trying to keep businesses open whenever possible. The Bank does this through loan restructuring in cases where there is reasonable positive turnaround expectations. For example, the Bank will allow borrowers to service only the interest and defer the capital repayments to the future. Enterprises and business people who have assets, such as commercial properties, are finding it difficult to liquidate these assets, so that they can inject capital into their businesses. This is because there are no buyers for such assets in the market or if there are buyers, such buyers want to pay prices far below the replacement costs of such assets.”