GIPF injects N$100m in ailing SME Bank

October 8, 2014, 9:01am

GIPF injects N$100m in ailing SME Bank

 

THE Government Institutions Pension Fund has decided to give the financially ailing SME Bank a cash injection of about N$100 million.

The Namibian understands that the GIPF Board of Trustees decided last week to open an account with the struggling bank to keep it afloat. 
GIPF head of marketing and communication Elvis Nashilongo confirmed the decision yesterday.
“In principle GIPF has agreed to make a deposit of N$ 100 million in the SME Bank,” Nasholongo said.
He, however, said the actual transaction was pending due to negotiations on the terms and conditions for the deposit. He explained that talks between the two parties will take place later. Nashilongo further said GIPF was motivated to open an account with the institution because of promotions the bank offers, as well as the need to diversify the Fund's deposit wallet.
Some sources said GIPF decided to open an account with the bank because it did not want to put in the money as an investment.
According to the sources, the SME Bank allegedly requested a N$2 billion investment from GIPF. 
The SME Bank allegedly made a presentation to GIPF, and the fund conducted a due diligence process, which raised several questions about the way the bank was being run. 
The fact that the SME Bank was a startup also allegedly made GIPF decide not to rush the investment. 
The sources also said that GIPF had to deposit the N$100 million as a consolation since the Fund was reluctant to invest. 
Although Nashilongo denied that the SME Bank formally approached the fund to solicit for business, he admitted that the Fund conducted a due diligence “as a pro-active measure and not in response to a request to invest in the bank”. Nashilongo, who said the fund wanted to be more informed about the new bank, could not provide details pertaining to the outcome of the due diligence citing a non-disclosure agreement. The SME Bank has struggled financially since it was established in 2012, with government initially reluctant to release funds as owner's equity for its 65% stake. 
The Namibian last year reported that things were going so bad that the Bank of Namibia considered shutting the SME Bank down, since it was struggling to meet the required minimum cash reserves. 
Sources said then that the closure was imminent until the Ministry of Mines and Energy's National Energy Fund deposited N$70 million to keep the bank afloat in June last year. The Namibian also reported that government, through the Ministry of Trade and Industry, approved a N$500 million injection into the bank to enable it to start giving loans to the public. This amount was on top of more than N$100 million that was supposed to be transferred from the Namibia Financing Trust to the SME Bank as part of government's buy into the the bank. The central bank and the SME Bank had always maintained that the semi-parastatal bank had no cash flow problems, despite sources claiming that it is yet to fully comply with the central bank's laws. Sources said that government was reluctant to release the funding because it had questions regarding its partners and the operations of the bank. 
Government, in the national budget, allocated N$190 million to the SME Bank this year, N$340 million next year and N$100 million for the 2016 budget. 
The SME Bank is yet to release its annual financial reports. Yesterday, the bank's spokesperson, Angrid Shimuafeni, could not respond to questions regarding the annual reports due to the unavailability of Bank CEO Tawanda Mumvuma.

By Tileni Mongudhi the Namibian