DBN a model for social enterprise in finance
The DBN’s track record of growth and the exercise of social purpose show that social enterprise can flourish in the financial sector.
Staff Reporter - The Development Bank of Namibia (DBN) transcends stereotypes of financial enterprises, by reapplying profits in the interests of financial service delivery, while delivering growth, says its senior manager: corporate communication, Jerome Mutumba.
The key distinction, Mutumba says, is that DBN has a core focus on long-term growth of its balance sheet, whereas private sector providers of finance are often constrained by shareholder requirements for short-term returns. He illustrates this point by saying that the DBN’s apportionment of its earnings consists primarily of reapplication of funds to additional lending for infrastructure and enterprises. The bank also allocates returns to prudent financial reserves, and redemption of its bond.
Multiplier effect
The reapplication of funds for lending has a multiplier effect on the DBN’s capacity to lend. This can be seen from the bank’s approvals growth from N$110.7 million reported in 2005, to N$4.42 billion in 2017. The bank’s balance sheet stood at approximately N$7.82 billion in 2017.
Mutumba says that this should not just be seen as financial growth but also a multiplier of the number of projects, scope and size, in the fields of both enterprises and infrastructure.
Taken in total, he says, the track record of growth and the exercise of social purpose show that social enterprise can flourish in the financial sector. The benefit of this approach is seen in investor confidence, proven by subscribers to the bank’s bond. Not only does the bond add to the range of investment mechanisms within Namibia, but it also gives investors an opportunity to harvest returns from social enterprise, Mutumba says.
Social investment
The DBN allocates a portion of its earnings to various applications that can be seen as further investment in Namibia. This is done in agreement of the bank’s shareholder, the Minister of Finance.
The first portion is allocated to DBN’s Project Preparation Fund (PPF). This fund is applied to projects that have potentially significant development impact, but do not yet meet the bank’s requirements. Financial resources from the PPF are allocated to further analyse areas of the application to identify risks, and recommend mitigation measures. Through this mechanism, the DBN is able to finance projects which might previously posed a threat to its sustainability.
The second portion is allocated to corporate social investment. Mutumba says that the bank’s core business is to preserve its sustainability and grow through lending, however it took a decision to provide donor finance to projects which would not ordinarily qualify for finance through corporate social investment. Projects financed under this allocation are selected to alleviate poverty, develop education, develop skills, steward the environment, improve community health, and improve the business environment.
Awards
A third portion is allocated to the Innovation Award. This initiative provides a solution to Namibia’s need for innovation by identifying the most innovative enterprise entered for consideration by the public, and rewarding the winner with a combination of grant finance and loan finance. Capital provided by the Innovation Award is seen as seed finance.
Finally, the DBN also hosts the Good Business Awards. These awards are used to highlight a combination of good business administration and development impact to the public, as a stimulus to administer enterprises well, and/or to apply for DBN finance.
According to Mutumba the DBN is a case study, not only for social enterprise in the financial sector, but also for the means in which finance providers can allocate CSI and outreach budgets to secure their operations, and improve their operating environments.
The key distinction, Mutumba says, is that DBN has a core focus on long-term growth of its balance sheet, whereas private sector providers of finance are often constrained by shareholder requirements for short-term returns. He illustrates this point by saying that the DBN’s apportionment of its earnings consists primarily of reapplication of funds to additional lending for infrastructure and enterprises. The bank also allocates returns to prudent financial reserves, and redemption of its bond.
Multiplier effect
The reapplication of funds for lending has a multiplier effect on the DBN’s capacity to lend. This can be seen from the bank’s approvals growth from N$110.7 million reported in 2005, to N$4.42 billion in 2017. The bank’s balance sheet stood at approximately N$7.82 billion in 2017.
Mutumba says that this should not just be seen as financial growth but also a multiplier of the number of projects, scope and size, in the fields of both enterprises and infrastructure.
Taken in total, he says, the track record of growth and the exercise of social purpose show that social enterprise can flourish in the financial sector. The benefit of this approach is seen in investor confidence, proven by subscribers to the bank’s bond. Not only does the bond add to the range of investment mechanisms within Namibia, but it also gives investors an opportunity to harvest returns from social enterprise, Mutumba says.
Social investment
The DBN allocates a portion of its earnings to various applications that can be seen as further investment in Namibia. This is done in agreement of the bank’s shareholder, the Minister of Finance.
The first portion is allocated to DBN’s Project Preparation Fund (PPF). This fund is applied to projects that have potentially significant development impact, but do not yet meet the bank’s requirements. Financial resources from the PPF are allocated to further analyse areas of the application to identify risks, and recommend mitigation measures. Through this mechanism, the DBN is able to finance projects which might previously posed a threat to its sustainability.
The second portion is allocated to corporate social investment. Mutumba says that the bank’s core business is to preserve its sustainability and grow through lending, however it took a decision to provide donor finance to projects which would not ordinarily qualify for finance through corporate social investment. Projects financed under this allocation are selected to alleviate poverty, develop education, develop skills, steward the environment, improve community health, and improve the business environment.
Awards
A third portion is allocated to the Innovation Award. This initiative provides a solution to Namibia’s need for innovation by identifying the most innovative enterprise entered for consideration by the public, and rewarding the winner with a combination of grant finance and loan finance. Capital provided by the Innovation Award is seen as seed finance.
Finally, the DBN also hosts the Good Business Awards. These awards are used to highlight a combination of good business administration and development impact to the public, as a stimulus to administer enterprises well, and/or to apply for DBN finance.
According to Mutumba the DBN is a case study, not only for social enterprise in the financial sector, but also for the means in which finance providers can allocate CSI and outreach budgets to secure their operations, and improve their operating environments.
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