DFIs pump N$7b into economy

19 Oct 2014 22:00

Development Financial Institutions (DFIs) have pumped about N$7b into the development of local businesses in the agriculture sector and the mainstream economy between 2005 to date the latest information gathered by The Villager shows.
While the Development Bank of Namibia (DBN), Chief Executive Officer (CEO), Martin Inkumbi revealed that the bank has issued out N$4.5b worth of loans with N$1.6b going to previous disadvantaged Namibians in line with affirmative action laws, CEO of Agribank Leonard Ipumbu revealed that his institution pumped in N$1.25b to 987 previously disadvantaged Namibians constituting 52% of their loan book.
CEO of the SME Bank Tawanda Mumvuma revealed the micro financing institution has so availed N$80m to 750 small business owners in the country since their inception two years ago.
He further said their analysis of private enterprises showed that 62.1% of enterprises financed by the bank from 2005 to 2013 are owned by PDNs and of these businesses owned by PDNs, 12.7% are large corporate enterprises, while 87.3% are SMEs.
Inkumbi, however, added that although significant ground has been covered in enhancing participation of locals in the economy through the availing of capital, high impairment ratios remain a worrisome trend, adding that SMEs need to be financially prudent and improve their prioritization of spending.
“DBN lends only to enterprises incorporated in Namibia and the bank has a strong emphasis on Namibian ownership of these enterprises it advances loans to. In the absence of a national definition of an SME enterprise, DBN’s own definition for an SME is a small business requiring capital of N$5m and below,” he said.
He further noted that DBN takes a broader view rather than just focusing on who the owner of the business is because it needs to assess the benefits of a loan, saying the Bank considers not only the direct benefits to the owner of the businesses, but also the direct benefits to employees and other stakeholders of such a business enterprise.  
DBN’s records show that between 2005 and 2013, Khomas, Erongo, Otjizondjupa and Oshana in that order have received comparatively more loans from the Bank than other regions.  
“We believe this is a reflection of more economic activities prevalent in these regions. There are the same regions with more intense economic activities than others due to the different comparative and competitive advantages relative to one another,” he said.
Inkumbi maintained that these could be due to the different prevalence of natural resources which creates more opportunities in some regions and differences in population densities which present different market potential for enterprises. These differences are the cause of variances in the intensity of economic activities in regions.
“The Bank has, however, advanced loans to all regions in Namibia and we make deliberated efforts to have an impact in each region every year. Comparatively more employment opportunities where either created and or maintained in these regions and more goods and services where produced, and these regions are commercial centers and possibly one will observe high rates of immigration of people into these regions, which might not necessarily be considered a positive benefit,” he said.
Meanwhile, Mumvuma added, “Majority of these are in the construction sector followed by commercial trading, transport, and business services. The funding invested into SMEs complement many of the government initiatives through TIPEEG by ensuring that those that get tenders for instance to build classrooms, libraries, clinics, offices, accommodation, roads, infrastructure maintenance and those that are involved in the procurement of: medical supplies, uniforms, food, stationery, office equipment, and other services get access to capital so that their projects and purchase orders can be delivered to specification and on time,”
He added that the challenge the bank is facing is provision of long-term finance which it is not yet able to offer but considers critical to SME success.
“Long-term funding is pivotal to the development and success of the SME sector. Besides tender-based projects, a significant amount of lending has also been made to benefit youth entrepreneurs such as pharmacists, doctors, engineers, IT technicians, tour operators, bakeries and restaurant operators,” Mumvuma said.
In terms of regional distribution; Khomas, Ohangwena, Oshana have the highest concentration respectively in terms of loan values from the SME Bank followed by Erongo, Kavango, Zambezi and Oshikoto and the rest of the regions except the Kunene region which is yet to benefit
“Micro-enterprises also benefitted from SME Bank through its micro-loan facility offering which has, to date, assisted mainly women engaged in activities such as: tailoring, sewing, kiosks, catering, events, decor, trading and baking; making many of them become self-employed,” said Mumvuma.   
“Now that the Bank is embarking on rolling out its branch network, it will be possible to enhance outreach and access to its services as this has been a challenge to date. Besides credit provision, ordinary men and women of various ages and backgrounds now have access to savings and free deposit fee transaction accounts,” he added.
Commenting on the contribution made so far, Iipumbu said, “Approximately 3382 permanent and 6764 temporary jobs have been created or retained through purchase of farm-land under the initiative indirectly supporting more than 13 000 families.
“The major challenges faced by the AALS farmers in addition to the climate change is the escalation of the prices per hectare for the previously disadvantage Namibians, rendering acquiring of commercial farms unaffordable, Iipumbu added.
He also said that it also equally challenging that some of the beneficiaries of load fail to utilize the production loans. “The lack of sufficient security available on the farm land to enable farmers to acquire any other loans in order to enhance farm productivity,” he said.