In November 2020, the Bank of Namibia launched a Covid-19 SME Loan Scheme with N$500 million accessible to small and medium enterprises through participating banking institutions.
However, since the scheme’s inception, only N$6.4 million, or 1.3%, was utilised for this purpose.
“As an industry, we went back to the drawing board to listen and learn through rigorous consultations with various stakeholders, including the participating banks, the Bankers Association of Namibia (BAN), the Business Rescue Task Force (BRTF) and SME representative associations, to gauge the challenges the SMEs were facing with regards to qualifying for and accessing the scheme,” said BoN governor Johannes !Gawaxab
yesterday during the relaunch of the Covid-19 SME Loan Scheme, now renamed, the SME Economic Recovery Scheme.
Stringent qualifying criteria
He stated the qualifying criteria have been revised to be more inclusive and not limited to the aftermath of the Covid-19 pandemic. One of the factors of low uptake was the high lending rate, which has now been reduced to prime less 50 basis points.
SMEs with tax liabilities can participate in the scheme on condition that they enter into a payment agreement with Namibia Revenue Agency (NamRA). He further noted that participating banks are going to involve regional branches in administering the scheme. Covid-19 has indeed challenged operating models in more ways than one and resulted in business closures, depressed profits and financial losses, preceded by economic contractions since 2016.
“The business community has been hit by high fuel and transportation costs, impacting their bottom line, and making their survival even more precarious. To improve the state of the nation and improve the fortunes of our businesses, a recovery/reset initiative is required,” the governor added.
SMEs play a vital role in any nation’s economic advancement and employment creation, as they are the lifeblood of the economy.
A 2017 International Finance Corporation study on micro, small, and medium enterprises (MSMEs), !Gawaxab noted, estimated that there are approximately 71 000 MSMEs in Namibia. MSMEs provide employment and income to around 160 000 Namibians, accounting for approximately one-third of the country’s workforce, and contributing to 12% of the gross domestic product (GDP).
For the SME sector to thrive and optimise its contribution to economic growth, development and job creation, access to financial services and adequate financing is, without a doubt, very crucial, said the governor. “We have repackaged the Covid-19 SME Loan Scheme to address the unique challenges SMEs face in the post-Covid-19 and ongoing geo-political tense
environment. The crafters of the scheme include the finance ministry, BoN and various participating commercial banks, namely Bank Windhoek, First National Bank, Nedbank and Standard Bank,” listed !Gawaxab. At the same occasion, deputy finance minister Maureen Hinda-Mbuende said the overarching objective of lending a helping hand to those key but struggling businesses in the economy has remained. “Though we have adjusted the sails in response to the headwinds faced, your unmatched entrepreneurial drive should make a positive impact on this great
initiative.
This is your scheme, own it, and use every opportunity to change the status quo.”
Hinda-Mbuende thus urged SMEs to make use of the scheme, and not to forget their commitment of repaying on time.
Requirements
The repackaged loan scheme is applicable to registered businesses, including sole proprietorships, with an annual turnover of less than N$60 million. The business must also have the ability to continue operating for the foreseeable future, must be registered with NamRA, and be tax-compliant and must not have any recovery loan schemes with other institutions.
Still struggling
“It’s not okay. It is not business as usual. Business people are still struggling. We are struggling to meet our monthly commitments. We are still retrenching staff. We are choosing what to pay this month and what to pay next. We are still falling behind. We need help. So, it still remains extremely difficult to survive in business,” said local businesswoman Amalia Schmidt at the same event.
She added that the local business community is still experiencing diminished turnover, mainly as a result of the diminished buying power within communities, predominantly brought on by the fact that so many people have lost their jobs.
“We have people who are not eating every day. There are people who are eating every third day. These are realities in our country at the moment. Many of these job losses and impact on the overall economy could have been prevented by positive interventions of Covid-19 relief and cash flow relief mechanisms,” Schmidt observed.
Other challenges, she noted, are “bad politics” played in the business environment, coupled with red tape and bureaucracy.
Despite all these challenges, she added: “We are still tenacious, and we’re still very optimistic about the Namibian economy. We still believe that we can revive our economy through a combined synergy of all role- players. But we need your help.”