Development Bank of Namibia (DBN) CEO Martin Inkumbi has announced that the Bank will resume financing for SMEs. The announcement follows in the wake of the suspension of operations of SME Bank.
Talking about the resumption of SME finance, Inkumbi says that due to the gap in the market for finance, the Bank and the Minister of Finance, Hon. Calle Schlettwein, the Bank’s shareholder representative, have agreed that DBN should take the necessary steps to resume its financing activities for SMEs.
Inkumbi says that the Bank has the capacity, the necessary pool of capital, as well as the ability to redirect human resource capacity to fill the gap. Previously, the Bank shifted its focus to providing finance for larger enterprises. Inkumbi, however, states that the Bank has maintained its stable of SME borrowers that it developed prior to the shift in focus, and that new borrowers will be inducted into the current system.
Asked about what SME borrowers can expect from DBN, Inkumbi says 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.
Asked about new elements that may impact SMEs, Inkumbi notes that DBN has put in place an environmental and social management system to ensure adherence to relevant environmental and social legislation, and to minimize negative impacts on the environment.
He also says that the Bank has introduced a client support function which can provide coaching and mentorship to further develop capacity for SMEs.
On the topic of the current SME Bank borrowers, Inkumbi states that DBN will not necessary be taking over existing loans, but will consider new financing requirements to start and or expand business activities. All applications for finance will be subject to DBN’s normal due diligence process. This process, he explains, was established, and has been tested and refined over the years, since the Bank’s inception in 2004.
All applications for SME finance will be treated on individual merit, based on the appraisal of the Bank’s Portfolio Managers, as well as its Credit and Risk Committees. Inkumbi directs potential applicants to the Bank’s website, www.dbn.com.na, where they can find out more about the requirements for borrowing and download application forms.
The Bank, Inkumbi concludes, is aware of the importance of SMEs for the economic development of Namibia. Consequently, successful applicants for SME finance can expect more in terms of support.
Development Bank of Namibia (DBN) CEO Martin Inkumbi has reiterated the Bank’s support for the manufacturing sector. The Bank is currently engaged in a drive to stimulate the sector with finance, and is reaching out to existing manufacturers with expansion plans, and potential manufacturing start-ups.
Inkumbi states that more consumption of locally manufactured goods is required to grow the local manufacturing sector. He adds that charity starts at home, and that to stimulate the sector, both public and private procurement policies and practices should give preference to goods that are produced locally.
This has benefits such as local employment creation and also improving the country’s balance of payments. The cost of a cheaper imported products can be much higher to the Namibian economy than the market price of that product, when lost employment opportunities and drains on the balance of payments are taken into account, he explains. Local value chains must be grown by procuring and consuming locally produced goods wherever possible.
Inkumbi says that the Bank believes that manufacturing can benefit from opportunities through import substitution, in line with NDP5 and the Growth-at-Home strategy. By seeking opportunities, and exploiting them, Namibian manufacturers can make progress towards achieving economies of scale.
This, will also be augmented by the ambitions of manufacturers to penetrate regional markets. Concerning regional markets, Inkumbi states that although South Africa and Angola are experiencing recessionary economic environments, there are opportunities in other countries in the SADC. He says that economic contraction is a cyclical phenomenon, and that the upward trend of growth resumes in the long-term.
He points out that a viable manufacturing enterprise will have the scope to increase its output in future, and encourages entrepreneurs with plans to initiate them now, rather than delay at the expense of future productivity.
In addition to DBN finance applied to local start-ups and expansion, Inkumbi notes that the Bank also makes the offer of trade finance. Regional expansion can be a costly exercise, however with availability of capital for expansion, cross-border ambition should be seen as an investment in long-term returns.
Talking about the Bank’s support to manufacturing, Inkumbi says that the Bank’s lending terms are competitive for manufacturers, however the Bank has expanded its own philosophy to encompass support in the early application phase as well as post borrowing.
In certain instances, where the Bank identifies strong development impact potential, the Bank will make available expertise and financial support for studies and knowledge gathering through its Project Preparation Fund (PPF). The aim of the PPF is to secure the viability of the project and seek means to mitigate risks prior to borrowing.
The Bank also provides access to a network of consultant business professionals who assist with capacity development after lending. This can be used to develop skills or streamline and strengthen operations to the benefit of the borrower.
Talking broadly about access to finance for manufacturers, Inkumbi says that manufacturing enterprises face challenges attaining the optimal financing mix. DBN’s experience indicates that manufacturing enterprises with a higher equity capital in the financing mix tend to do better than those funded solely with debt capital. Manufacturing enterprises require a longer period to achieve break-even, given the complexity of their environments and the need to secure markets for their products.
Inkumbi also points out that the Bank may, at its own discretion, recommend a repayment holiday for manufacturers on interest, capital or both, depending on the requirement of the borrower, the project's cash flow and factors which become apparent in the application assessment.
Talking about indirect benefits to commercial sources of finance, he goes on to say strong manufacturing base will improve the economic ecosystem, and this will also improve long-term prospects for the financial sector, which is a good reason for all financiers to support manufacturing enterprises. He adds that the DBN will consider financial syndication to spread risks.
This however, must be supported by local procurement policies and practices, and financiers should encourage this among their own clients, in effect creating networks of procurement centered on the encouragement and policy of the provider of capital. If local consumers buy more local goods, this will result in higher sales revenues and better profitability for local manufacturers, which will makes it easier for local manufacturers to obtain finance from financiers.
Addressing manufacturers directly, he says that the Bank has a sound track record in financing the manufacturing sector, which includes cement, food processing, manufacturing of plastic goods, printing and agri-processing. Since its inception, the Bank has provided N$1.15 billion in finance to the manufacturing sector.
Manufacturing requires vision and ambition, and the Bank recognises this, and has commenced engaging local manufacturers, to better understand their challenges in raising capital. Manufacturers who have ambition and plans should make use of the Bank’s open door, and expect more, Inkumbi concludes