Credit guarantee scheme for SMEs

Staff Reporter – The Credit Guarantee Scheme for small and medium-sized enterprises, which will provide collateral cover of 60% for qualifying SMEs applying for finance from participating commercial finance institutions, is a reality.

Finance minister Iipumbu Shiimi on Tuesday launched the smart partnership, which will be funded with N$98 million seed capital from government and the Bank of Namibia (BoN).

The other partners are the Development Bank of Namibia (DBN), Namibia Special Risks Insurance Association (NASRIA) and participating financial institutions.

The rationale behind the Credit Guarantee Scheme (CGS) is that there are SMEs with excellent prospects for success and viable business plans, but lacking the necessary collateral to obtain loans.

Commercial finance institutions require the security of collateral to ensure that their capital is preserved in the event of an SME being unable to repay their loans. By insuring credit granted to qualifying SMEs, the CGS substantially reduces the collateral requirement for qualifying SMEs.

Shiimi said SMEs will have to apply for business loans at participating financial institutions. Upon being assessed as bankable and only lacking collateral, the SME can be considered for collateral cover of 60% of the principal loan amount.

Financial institutions

To date, the scheme will be available from First National Bank of Namibia (FNB).

A second financial institution has been approved for participation in the scheme, but will only be able to make the scheme available once contractual matters are finalised.

More financial institutions are expected to adopt the CGS in the near future, once they have more fully considered their participation in the scheme.

Talking about implementation of the scheme, the chief executive officer of the DBN, Martin Inkumbi, said the CGS is designed to provide widespread accessibility to SME borrowers, and so participation was offered to private sector lenders such as FNB Namibia and others.

He added that SMEs will be assessed in line with the participating financial institution’s credit (business loan) risk policies and procedures.

Asked why the scheme was not offered through DBN, Inkumbi said the bank already offers relaxed collateral requirements, and that a wider spread of financial institutions offering the scheme would enable the smart partnership to reach more SMEs.

NASRIA

The scheme will be underwritten by NASRIA, a key partner for the participating financial institutions while DBN provides expert support during the adjudication of claims.

Peter Grüttemeyer, chairperson of NASRIA, said the CGS was declared as a special risk to be underwritten by the association. NASRIA Ltd was established when the short-term insurance industry and government joined forces in 1987. Its mandate is to provide special risks insurance cover and to bring about social and economic changes.

Shiimi said that collective efforts from all stakeholders will ensure that the challenges that the SME sector faces are addressed effectively, including overall inclusive economic growth and social development in Namibia, particularly during this seriously challenging times of economic downturn and Covid-19.

He urged all stakeholders to join hands in the quest to collectively and innovatively contribute towards the enhancement of sustainable development of Namibia.

Shiimi encouraged SMEs to make a good use of the facility to be innovative and to take a long-term view of their business, while focusing on the set key business objectives.