WINDHOEK – The finance ministry as well as that of sport, youth and national service, in conjunction with the Development Bank of Namibia (DBN) on Wednesday unveiled a N$138.5 million small and medium enterprise (SME) financing strategy, to commence on 1 December, specifically aimed at enabling the youth to start or expand their businesses.
The SME Financing Strategy, for which funding is to be scaled up over time, is a bid to reduce alarmingly high youth unemployment, estimated at around 45 percent, to boost low economic growth and to promote self-employment.
The SME Financing Strategy is actually an offspring of the Namibia Financial Sector Strategy and signifies a joint partnership framework between public and private sector financiers.
“The bid for a designate SME Financing Strategy and the specific funding facilities for youth enterprises is to unlock the growth, job creation and self-employment potential of the SME sector. Further, the policy imperative is to achieve the twin objectives of enhancing access to affordable finance and fostering entrepreneurship and SME development across the broad range of economic sectors in all regions of the country,” said finance minister Calle Schlettwein at the launch.
The much-hyped strategy, which has its roots in the Harambee Prosperity Plan, encompasses three mutually reinforcing facilities, namely the Credit Guarantee Scheme, to provide for collateral for micro, small and medium-sized enterprises (MSMEs) without a collateral base; the Venture Capital Fund, to provide equity capital to high-growth SMEs whereby the government assumes the first loss, and the Mentorship and Coaching Programme to provide requisite capacity-building and mentorship for participating MSMEs.
Schlettwein explained that the financing strategy is a smart partnership between government, DBN, commercial banks and other private sector financiers. He noted that the Bank of Namibia played a key role in spearheading the formulation of the strategy and contributed to the pooling of resources to jump-start the initiative. He added that products in the strategy are co-financed through financial sector participation, thus enhancing scalability, governance and impact.
The finance minister noted that the strategy encompasses a skills-based youth lending facility, a funding facility for 121 constituency youth enterprises, a credit guarantee scheme, and a mentorship and coaching programme.
The skills-based youth lending facility, staring at a size of N$30 million, will be hosted by the finance ministry in collaboration with DBN. This facility will target the youth with a high proportion being accorded to those aged 35 and below at the time of application. This is in line with the national definition of youth and specifically targets young artisans such as plumbers, mechanics, technicians, fitters and turners such as those graduating from vocational education training as well as young professionals such as pharmacists, medical doctors, lawyers and engineers. This facility will accord a disproportionately high percentage of the facility, about 60 percent, to artisans and 40 percent to the professionals component, given the relatively easier access to traditional finance for the latter.
The funding facility for the 121 constituency youth enterprises is hosted by the sport, youth and national service ministry in collaboration with DBN. It aims to facilitate the establishment of youth enterprises in all constituencies, in line with the aspirations of youth enterprise development sub-pillar of the Harambee Prosperity Plan. As such, the facility will foster the establishment of youth owned enterprises in both urban and rural constituencies of the country, thus contributing towards employment creation, entrepreneurship development and SME-driven economic growth on the back of the youthful demographic dividend.
The facility will commence at a total size of N$8.5 million, to be scaled up over time once bankable projects are identified and assessed. Such funding will also support the project preparation and assessment for bankability.
“I am happy to inform you all that the Ministry of Sport, Youth and National Service is well on target toward the realisation of the set goal to establish the 121 rural youth enterprises. Earlier this year, the Development Bank of Namibia responded positively to the ministry’s call toward the capacity building of youth entrepreneurship. DBN thus offered a massive N$1 million for the training of over 484 young people from all the 121 constituencies toward youth enterprise establishment. The training that was carried out in conjunction with the University of Namibia, equipped the participating youth with better understanding of business principles for the enhancement and management of the youth-owned enterprises,” explained Minister of Sport, Youth and National Service, Erastus Uutoni.
Furthermore, the Credit Guarantee Scheme will be rolled out in collaboration with the Namibia Special Risks Insurance Association (Nasria). The scheme is of particular significance in addressing the binding constraint posed by the lack of collateral for qualifying SMEs. The facility will provide collateral cover for qualifying SMEs and commences at an initial size of N$100 million, for which N$2 million will be dedicated to the establishment of a database for SMEs.
“The facility size will be scaled up over the medium-term through greater public and private sector support. I must emphasise the operational modalities of the Credit Guarantee Scheme. SMEs and entrepreneurs will still continue to apply for credit at commercial banks. It is the financial institutions which will apply for collateral coverage for the assessed bankable projects which have high growth potential, but lack collateral,” Schlettwein clarified.
Meanwhile, the Mentorship and Coaching Programme will provide tailored training and capacity-building for beneficiaries of all these facilities. Training and mentorship will be extended either directly by DBN or through specialised service providers in coordination with similar existing initiatives at the Ministry of Industrialisation, Trade and SME Development as well as the United Nations programme.
“The products we are launching today will have lasting beneficial impacts for SMEs, entrepreneurs and the economy in general in the form of wealth and job creation. I call for greater synergy, prudent financial management and monitoring and evaluation during the implementation process. Inasmuch as the quality of outcomes is needed from formal and vocational education to spur the long-term development potential and competitiveness of the national economy, we increasingly need greater alignment with the market demand so as to facilitate effective labour market participation and employability,” said Schlettwein.