The Development Bank of Namibia (DBN) has been given back its mandate of funding SMEs with an annual turnover of less than N$15 million following the collapse of SME Bank, which is currently under provisional liquidation.
DBN CEO Martin Inkumbi confirmed this week that Government had already requested the bank to start processing SME loans, a mandate that was revoked in November 2015.
“The shareholder of the bank (DBN), which is also the majority shareholder of the SME Bank, has requested DBN to start lending to SMEs so that there is no vacuum left, in the sense that SMEs don’t know where to go for finance,” Inkumbi said.
He said DBN will be complementing other players, such as commercial banks, who are also into SME finance.
Inkumbi said the bank has a track record of SME funding, which he said performed well until the mandate was passed on to the now troubled SME Bank almost two years ago.
“Basically we are going back to the beginning, so to speak.”
But DBN will only consider loans of N$150,000 or more.
Inkumbi said other limitations that were imposed when the SME Bank took over the funding, like a business having a turnover of N$15 million, will not be required.
“So we say that any enterprise, whether it is a closed corporation, sole proprietor or anybody looking for a loan exceeding N$150,000 can apply for funding. All we will be looking at is whether the project is financially viable, is the project having a development impact and whether it will create a job or two and generate income for the owners.”
Despite the almost two-year lull since the bank financed SMEs, Inkumbi said DBN still has expertise to do the job. “There isn’t any reorganisation, at least at this stage. We are ready to accept applications from SMEs. We are ready to process them.”
He said the SME funding portfolio had performed very well in the past. “Obviously the SME portfolio has a high rate of non-performing loans and impairments due to the nature of SMEs. But it is a risk that needs to be managed.”
The DBN executive said the bank now has a coaching and mentoring programme, which will help SMEs and entrepreneurs who needs support.
The bank has also signed service agreements with companies and individuals in the areas of finance, legal, construction and marketing among others, which can be appointed to coach and mentor SMEs.
“Funding for that is provided through a portion of the profit of the bank, which we ask the Government to approve from the annual profit of the DBN, which is allocated to what we call a Client Support Fund and Project Preparation Fund.”
Inkumbi said the bank has the capacity, the necessary pool of capital, as well as the ability to redirect human resource capacity to fill the gap left by SME Bank.
Asked about what SME borrowers can expect from DBN, Inkumbi said that new applicants will be required to demonstrate viability of proposals for finance in terms of the bank’s assessment process, including business plans, the necessary human resources to maintain operations, willingness to share risks with the bank, and consideration of aspects of risk entailed in individual applications.
Inkumbi also noted that DBN had put in place an environmental and social management system to ensure adherence to relevant environmental and social legislation, and to minimise negative impacts on the environment.