Banks not motivated to invest in small businesses

There is little motivation for South African banks operating in Namibia to extend services to entrepreneurs and small businesses.

This is according to the World Bank’s Country Partnership Framework for Namibia report.

Released yesterday, the report says Namibia’s banking sector is heavily concentrated and uncompetitive, with four large financial groups holding 98% of total bank assets.

“While these major banks are highly liquid, they typically serve large firms and have little incentive to invest in innovation and extend services to entrepreneurs, micro, small and medium enterprises as well as excluded populations,” said the World Bank.

According to the bank, this lack of access to credit is a hindrance to improving the business environment in the country.

“As a result, domestic credit to the private sector was very low at 61% of gross domestic product (GDP) in 2022, well below the 140% average,” notes the report.

In 2023, the domestic credit to the private sector by banks was 50.11% of the country’s GDP.

Domestic credit to the private sector is the money banks and other financial institutions lend to businesses.

This can be in the form of loans, purchases of non equity securities, trade credits and other accounts receivable.

Another hindrance to the growth of the business environment in the country is a lack of skills, especially in digital fields, science, technology, engineering and mathematics.

“This, in part, requires investments in youth employment and improvements in education, from early childhood development through higher education,” said the World Bank.

Additionally, there has to be investment made to improve the quality of higher education while strengthening interventions and investments in technical and vocational education and training.

“It requires aligning training programmes with the needs of the private sector, including leveraging the capacity and resources of the private sector in the design and delivery of innovative skills programmes leveraging digital platforms,” said the World Bank.

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