VENTURES AFRICA – Namibia’s first SME bank will open by month-end, Trade and Industry Minister Hage Geingob has announced, in an initiative that will provide collateral-free lending for start-ups and SME expansion.
Given the go-ahead in 2009, the eagerly awaited bank will be based on a partnership between public and private sector players. 60 per cent ownership of the bank will be held by the Government of Namibia, which has promised to stump up the 60 million Namibian dollars ($7.1 million) start-up capital needed. The other majority shareholder will be the Zimbabwean Metropolitan Bank, which has pledged an additional 14 million Namibian dollars ($1.7 million) – 18 million Namibian dollars ($2.2 million) in funding.
Awarded a provisional license three years ago pending compilation of a viable business plan, the SME bank has seen huge delays in its creation due to the difficulties encountered by the Government in producing a business plan that answers the financing needs of SMEs in Namibia while adhering to the country’s Central Bank regulations. Numerous project plans were rejected on this basis, prompting doubt and critique of the project. Further delays were also experienced, with Metropolitan Bank being dealt onerous due diligence requirements, also provoking wide-spread dismay as to the obstacles placed before would-be foreign investors.
Speaking at the Rural Women’s Parliament session in Windhoek on Wednesday, Geingob now confirms that the bank will open its doors to clients by the end of the month. Geingob spoke of his high expectations for the bank, declaring that it would not only shake-up the Namibian banking sector as a whole, but would also be responsible for helping the previously disadvantaged to progress their business enterprises.
While the bank will operate as a fully-licensed commercial bank, the key innovation to the SME bank is found in the minimal importance that will be placed on traditional types of collateral. Essentially, the success of the projects invested in will act as the collateral for loans granted by the bank. With the main hindrance to SME start-ups in the country being the inability to secure financing due to a lack of capacity to provide collateral for loans, the SME bank promises innovative products to cater for low-income clients.
The bank will provide loans for tenders, franchises, and group-based loans; alongside providing entirely collateral-free loan opportunities for professionals. Each loan will be followed by a group of advisors within the bank, who will provide practical assistance to SME clients to ensure proper growth of the businesses. Explaining the business model, Geingob said: “The bank will not ask for any security, as the projects themselves become security to the SME Bank. It will ensure that the projects are feasible through project monitoring”.
It is expected the bank will pump 10-20 percent of its profits back into the fund pool for providing further collateral-free financing.