SMEs face greater challenges in obtaining loans: Iindji

31 Aug 2017 17:30pm
ONGWEDIVA, 31 AUG (NAMPA) – Small and Medium Enterprises (SMEs) are generally more likely to experience greater difficulties in obtaining loans from financial institutions, First National Bank (FNB) Area Business Manager for Far North has said.
Tomas Iindji made these remarks at the FNB-supported 4th Confidénte Newspaper and Namibia Chamber of Commerce and Industry (NCCI) joint business engagement held at the 2017 Ongwediva Annual Trade Affair on Wednesday evening.
“There are structural reasons for this, notably they are more opaque and their corporate capabilities more difficult to assess because their financial statements are less informative and their credit histories are usually shorter,” Iindji told those present.
These characteristics, Iindji said, are compounded by fixed costs in external assessment and monitoring, which lead to high transaction costs for the SMEs.
He said credit sources for small firms tend to dry up more rapidly than for large companies during an economic downturn, thereby disrupting their business and investment activities to a greater extent.
This, Iindji explained, has been the case during the crisis in the northern area, where creditworthiness and the financial health of SMEs have now deteriorated more sharply than those of large firms.
“The protracted period of weak economic conditions has exacerbated the asymmetric information challenges of SMEs,” he said.
Iindji, who is also the chairperson of the NCCI in northern Namibia, noted the need for the creation of a market for assets-backed securities.
Entrepreneurs who spoke during the engagement expressed concern over the commercial banks and other financial institutions’ reluctance to grant loans to emerging entrepreneurs, arguing that such tendencies prevent business growth in the SME sector.