Explaining the gap, Inkumbi says that while there is a financing ecosystem for SMEs in the commercial banking sector, there is a national imperative to finance SMEs that have lower levels of collateral availability, but still present a high degree of potential in terms of sustainability of the enterprise in spite of perceived risk. Perceptions of risk, he says, might emanate from lower collateral availability, but also from establishment in centres with lower population figures, rural areas, and in regions with lower economic activities.
One of the Bank’s socio-economic purposes is to nurture inclusive economic participation through finance for previously disadvantaged Namibians, including women entrepreneurs. The Bank is also using the vehicle of SME finance to foster the interests of younger entrepreneurs, which it sees as the basis for the future Namibian economy. SMEs are also seen as a mechanism to further develop regions with lower levels of economic activity and provide stimulus in rural areas.
Talking about DBN’s SME financing process, Inkumbi states that DBN’s operation bears no relation to SME Bank. Contrary to speculation, the Bank has no intention to operate in the retail banking field, and views itself as a pure development finance institution (DFI).
He continues to say that the Bank has a long track record of governance and due diligence in the field of SME finance, stretching back to shortly after the Bank’s inception, and this is now vested in the DBN SME Centre, to provide DBN with greater control in the form of a siloed operation, which due to its nature and relative risk, has intensive diligence requirements. Previously the Bank processed finance for infrastructure and larger enterprises alongside SMEs.
Talking about the day-to-day operation of the SME Centre, Inkumbi says that although the output can superficially be seen as finance for SMEs, the operation will be underpinned by several layers of support, particularly in the pre-application phase.
In the pre-application phase, the Bank particularly seeks to draw attention to the process of business planning. Without a realistic and achievable business plan, Inkumbi stresses, the applicant places herself / himself in a position of financial risk when borrowing. To this end, the Bank has developed a business plan content guide which will be freely available to potential borrowers. The Bank’s support will also extend to advising on completion of applications, and documents and certification required for the application. We want our borrowers to have the best possible prospect of success, Inkumbi adds.
Inkumbi says that a failed SME is a lost opportunity cost to the Bank, as that capital might have been directed to a different SME which might have flourished. This, he continues, is a matter of the need to preserve the Bank’s sustainability.
Once the complete application, business plan and set of documentation is received, the due diligence can proceed, after which the Bank will give a response to the application. Once the loan agreement has been concluded, Inkumbi says, the Bank will engage in rigorous monitoring to identify borrowers who run into difficulty, and provide corrective support if justified.
In closing, Inkumbi urges applicants to give their best during the planning and application phase. He says, DBN is a Bank that seeks excellence. When borrowers succeed in their enterprise endeavours, the Bank has succeeded in its endeavour to assist them, and to develop the nation.