THE Development Bank of Namibia’s small and medium enterprise (SME) finance department received 498 loan applications between April 2020 and March 2021.
Out of those only 177 applications were approved for funding.
This was recently revealed by the bank’s chief executive officer, Martin Inkumbi.
These applications included Covid-19 business-relief loans, skills-based financing for young entrepreneurs, as well as tender-based financing.
As a result, the DBN managed to approve N$155,7 million for 177 SMEs, Inkumbi says. This is, however, a decline compared to the past two financial years.
During the 2019/20 financial year the approved amount extended to 165 SMEs was N$279,3 million.This accounted for 24,5% of all loan approvals. Indicating that funding per SME has reduced to cater for more entrepreneurs.
In the 2018/19 financial year, the bank funded SMEs to the tune of N$160,3 million.
The DBN has been directed to resume its SME financing function after this was discontinued when the government started an SME bank, which, under the watchful eye appointed directors and the Bank of Namibia, was reported to be looted by politicians and their Zimbabwean managers.
The DBN’s loans and advances stood at N$8,47 billion by the end of March last year, reflecting a slight decrease of N$4 million from N$8,51 billion in 2019.
Its total assets in 2020 stood at N$9,5 billion – a reduction of 1% compared to 2019’s results.
The bank in its 2019/20 financial report said “due to risk aversion on the part of sources of finance, access to finance remains a barrier to growth for SMEs”.
Inkumbi says the DBN is investigating ways to deliver equity capital to SMEs through an SME venture capital fund in terms of its SME financing strategy.
“This reduces enterprises’ debt burdens,” he says.
The bank is also advocating partnerships with equity partners or investors to optimise the funding structure of start-ups and existing enterprises.
Inkumbi provided the main reasons for the bank rejecting loans to SMEs, adding that the DBN is a responsible lender.
“Applications that place the applicant at financial risk are declined to preserve the financial security of the project promoter,” he says.
Applications are therefore declined due to a lack of economic viability.
Another reason is SME owners presenting poor business plans and cash-flow projections for their projects, which makes it hard to deduce the viability of such projects, Inkumbi says.
Poor market research, involving collecting information and data on the demand for a certain product, can also lead to rejecting a loan.
Demand can be influenced by market size, competition and the purchasing power of the targeted market, he says.
In 2019/20, the DBN committed N$1,14 billion in loans, guarantees, and co-financing to support the country’s development needs, compared to N$682,1 million in the previous financial year.
The bank indicated that the demand for financing increased in the 2019/20 financial year despite the recessionary climate.
This is illustrated by the fact that the bank was able to increase the number of start-up approvals to 36, compared to 21 in the 2018/19 financial year.
DBN board chairperson Tania Hangula says by providing entrepreneurial finance, services for both artisans and professionals can be spread across multiple enterprises and communities, rather than being concentrated in single workplaces.
The //Kharas region received the largest share of loan allocations in the amount of N$78,8 million.
The Khomas region received N$45,4 million in approvals, and the Erongo region N$33,9 million.
SME projects with a national footprint were allocated N$30,7 million in approvals.
