SME Bank needs N$1bn

22 August 2013 Author   Da’oud Vries

front sme 23 augTHE Minister of Trade and Industry, Calle Schlettwein feels disappointed with local businesses for not making deposits with the SME Bank in which the Government has 65 percent shareholding. This comes amid reports that the bank does not have adequate capitalisation to serve the SME sector, which many feel has not received the necessary support from existing financial institutions.

The SME Bank opened its doors at the beginning of this year.

Schlettwein said that the bank needs the support of local businesses and the wider public to succeed.

The SME sector, he said, has not been “well served by the financial sector and a dedicated bank that serves the SME sector is crucial to bring about the development of the sector”.

“If the existing banks were serving the SMEs, then there would have been no need to establish an SME Bank.”

The SME Bank “has not enjoyed much support from the local business community depositing their funds. I think we must work at that to make sure the bank remains credible and with that business will grow”.

However, there are positive developments for the bank as a number of State-owned enterprises have pledged their support for the bank to succeed, the Chief Executive Officer of the SME Bank Tawanda Mumvuma said this week.

Mumvuma confirmed that the bank had started taking deposits from parastatals and other Government agencies.

He said the bank would open two branches before the end of this year – one in the North and the other in Katutura.

“Operationally everything is running smoothly and the IT systems are up,” he said confidently.

The bank started with seed capital of N$165 million and needs an asset base of N$1 billion in order to execute its mandate properly.

“Anything short of this will do something, but will not satisfy the needs of the SME sector.”

The business of a bank cannot only run with equity capital, he said, adding that deposits are crucial to the success of any bank.

The Bank of Namibia has granted the SME Bank a commercial bank licence and “it is here to stay and compete with the existing four commercial banks”.

“If the SME Bank wants to be successful it must be competitive and bring relevant instruments into the market to out-compete the existing bank,” Schlettwein said.

Banks are successful, he said, “If there is absolute trust in their ability to keep depositors money and to do business in an open and very transparent way.

“So if the trust deteriorates then the bank is in trouble. It is unfortunate that some of these negative issues were put out without any credible evidence,” he said of the recent reports the media had subjected the bank to.

Birth of bank

The idea of an SME Bank was mooted as far back as 2003 and a team of consultants was set up to pursue the formation of such a bank.

The consultants visited countries such as Malaysia, Thailand and Kenya to examine various models of SME banks.

The consultants presented a business plan to Cabinet to set up a full-fledged commercial SME bank.

The Cabinet approved the business plan and called for proposals of interest from local as well as international banks to join the Government as a technical partner.

Banks from Zimbabwe, Pakistan and India as well as all the local 4 commercial banks, submitted their bids to partner the Government in setting up the SME bank.

The KPMG auditing firm, Shikongo Law Chambers, Shangelao Capital and a Kenyan banker, Kimathi Mutua, founder and chairperson of K-Rep Bank in Kenya, who chaired the process, carried out the vetting process of the bids.

The panel also included banking experts from Malaysia and Thailand.

After presentations to the adjudicators, they identified Metbank of Zimbabwe as the bank to partner the Government.

The Cabinet Committee on Economics then subjected Metbank to scrutiny and it made two presentations to the committee before it received the nod.

In addition, the Bank of Namibia also performed its due diligence before approving Metbank as the technical partner.

They agreed to allocate shareholding of the bank at 65 percent for Government and 35 percent for the technical partner (Metbank)

The Namibia Financial Trust (NFT) holds the Government’s 65 percent.

The NFT, which in some media reports had been described as “dubious” purchased the building in which the SME Bank is housed.

“I am not sure what is dubious about the trust. It was properly registered, and it is the go-between between the Government and the bank. There is nothing dubious about it!” Schlettwein said when commenting on the media reports.

Asked why the bank first purchased a building and registered it in the name of NFT, instead of in the SME Bank, Schlettwein said it was a board decision, but that they were busy transferring it into the name of the bank.

He also said that there was nothing untoward for the bank to purchase premises from which to operate.

“The bank was motivated to buy the building because of the expensive capital and IT outlay a bank requires and also to demonstrate that it was here to stay,” the banks CEO Mumvuma reacted.

Credibility of directors

About the credibility of some of the board members, Schlettwein said, “the Bank of Namibia is the institution which has the authority to make sure that the shareholders and the directors are fit and proper persons to run a bank”.

He said he had complete faith in the competence of the Bank of Namibia for having given a clean bill of health to all directors of the SME Bank.

“I can do nothing else but to trust the regulator that has been given the official mandate to make sure that financial institutions are run by fit and proper persons.”

Transitional board

Schlettwein also spoke about the initial board that they established before the bank received the operating licence.

He said that board, which current Permanent Secretary of Health Andrew Ndishishi, chaired was a transitional board.

“That board’s responsibility was to prepare for the opening of the bank so that when the licence was issued and capital provided the bank would get up and running.

“When the board was granted the licence that board had done its job and a new board took over after the two shareholders agreed on the new board members,” he explained.

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