By Mbatjiua Ngavirue WINDHOEK The Development Bank of Namibia (DBN) seems to be a slightly misunderstood institution but, as much as the bank tries to explain itself to the public, its efforts do not always seem to succeed. The main reason for this is probably that Namibians expect so much from the bank and tend to want it to be all things to all men, and all women. In a recent interview, Chief Executive Officer of the DBN, David Nuyoma, acknowledged that the bank does feel slightly misunderstood. He attributes the problem to the fact that the DBN is still very new at only two years old and people do not really know what it is supposed to be. “Everyone has their own concept of what a development institution should be, making it difficult to satisfy everyone’s expectations,” he remarked. He expressed the hope that the role of the DBN would become much clearer over time. “This is one of the reasons we publicly announce our loan approvals, so that people can start to understand the sort of things we are doing,” he added. The most important thing people probably need to understand is that the DBN is not the bank to go to if you want to borrow money to start a small tuck-shop, hair salon, cuca shop or a workshop to repair old cars. The main focus of the DBN’s lending is on large infrastructure projects, and it was not really created to cater for small and medium enterprises. This has led to a great deal of bitterness among black small businessmen who feel the bank does not assist them, and they often angrily accuse the bank of having abandoned them. Nuyoma, however, insists there is no question of “abandonment”, and that although the bank’s primary role is not to serve SMEs, it recognizes it has a role to play in enterprise development. As a result, it supports small enterprises and SMEs, both directly and indirectly. The DBN chose to make use of a provision in the Act creating the bank, which states that the bank shall have a Special Development Fund. Through the Special Development Fund, the DBN has created a window to provide enterprise support to SMEs. Nuyoma says the bank, however, only did this after first carefully considering how it could best make financing available to SMEs in a “cost-effective manner”. For this reason, the DBN decided to enter into a partnership agreement with local commercial bank, Bank Windhoek. When the DBN was created, it inherited the SME loan book of an earlier government development institution, the now defunct Development Fund of Namibia (DFN). The DFN loan book of almost N$90 million was in terrible shape, with N$84 million in outstanding loans in its main book plus N$5 million in its SME loan book virtually all non-performing and unrecoverable loans. “We did not want to repeat the same mistakes. We had to draw lessons from this,” Nuyoma said. When considering how best they could help SMEs, one of the considerations they looked at was the need to provide capacity building for SMEs. They also realized that it would need an extended branch network, and a dedicated department, to support SMEs. The DBN itself is only two years old and does not have the necessary infrastructure to meet all these requirements. The option of wholesale financing, which involved going into partnership with Bank Windhoek therefore became very attractive, Nuyoma says. “The model for supporting SMEs at Bank Windhoek pretty much coincided with our own thinking in the sense that it involves financing through a dedicated branch network. “But, most importantly, it involves providing business support through a mentoring programme,” he noted. A common complaint among small business-owners is that the DBN has left SMEs open to exploitation by sharks in the commercial banking world. They also complain about high interest rates, the demand for some form of collateral and onerous requirements for business plans and other documentation that small business-owners feel they are not in a position to provide. Nuyoma, however, rejected the notion of describing Bank Windhoek as a “shark”. “The criteria Bank Windhoek uses are based on the provisions of our Special Development Fund. If we had to lend to SMEs directly ourselves, we would have the same requirements,” he argued. Collateral, he says, is not only a way for banks to secure themselves but also to test a borrower’s commitment to their business. He gave the assurance, however, that collateral is not the main consideration with either the DBN or Bank Windhoek. The main consideration is whether the project meets the criteria laid out in terms of job-creation, provision of goods and services, generating export earnings and promoting activities that add value to the Namibian economy. “The SME loans may not require full collateral, but there must be clear commitment from the promoter. They must be prepared to put something on the table,” he felt. Failure to require collateral is one of the weaknesses the DBN saw in the DFN loan book it inherited. “If the borrower is prepared to provide security, it becomes a partnership between lender and borrower. There must be some commitment,” he emphasized. Furthermore, a business plan is simply the provision of information in a logical format stating the business case. He suggested that if people cannot provide that information, they probably do not have a clear idea of what they want to do anyway. There also appears to be some misunderstanding about the type of SME lending the DBN is involved in. Nuyoma stressed that the area of SME lending DBN has earmarked for itself is for businesses that have a requirement for N$250ÃÆ’Æ‘ÀÃ…ÃÆ”šÃ‚ 000 to N$3 million. When the bank was drawing up its own business plan, it saw that the Ministry of Trade and Industry’s Small business Credit Guarantee Trust already adequately catered for amounts up to N$250ÃÆ’Æ‘ÀÃ…ÃÆ”šÃ‚ 000. “Doing micro-lending requires a completely different approach. We can’t do everything within one institution. If we try to do everything, we will burn ourselves,” Nuyoma warned. He pointed out that in South Africa each province has its own dedicated Development Corporation. “At some point in the future we as a nation might have to consider creating a dedicated SME lending institution,” he remarked. The DBN does provide some SME financing directly – outside the arrangement with Bank Windhoek – but this is mainly bridging finance to help contractors complete projects. For the moment he is, however, happy with the way the joint venture with Bank Windhoek works. “Personally, I’m very happy with the progress we are making through Bank Windhoek. The partnership is going according to plan. “I’m confident that next year this time, we will be able to fill at least two halls with the products of SMEs that have benefited from the scheme,” he predicted.