DBN launches microfinance framework

The Development Bank of Namibia (DBN) on Wednesday night launched its Microfinance Support Framework – a funding mechanism aimed at providing capital loans to organisations which support development through low-cost micro-loans.

Essentially, loans emanating from this framework will serve to develop micro-enterprise, basic housing, improvement of rural communal and small-scale farming, community and youth organisations, and allied training and support. While there are already a number of micro-lending institutions in the country, the Support Framework aims to enhance the extent and the reach of lending by presenting an additional source of capital.According to DBN’s CEO, David Nuyoma, “The history of industrialisation shows time and again that although large-scale industry is crucial, diversity and strength of micro and small-scale enterprises are baseline indicators of the potential of an economy to develop, grow and attain long-term stability.This is what the DBN has set out to support and achieve with the implementation of the Microfinance Framework.”But history has also shown that loan sharks and dodgy microlenders do exist, often limiting the ability of micro and small-scale enterprises to effectively develop into their full potential.A 2005 report by the Namibia Economic Policy Research Unit advised that both regulators such as the Namibia Financial Institutions Supervisory Authority and practitioners should explore and promote ways that microfinance institutions can reduce costs while controlling the integrity of the loan portfolio in order to prevent such incidences.To this effect, DBN has responded by restricting access to the available capital to organisations that operate in the interest of development, and with responsible lending policies.Launching the product, President Hifikepunye Pohamba explained that the framework “is not intended for loan sharks, but for developing specialised micro financing institutions committed to economic development and to extending financial support to segments of society in rural communities, the youth and the unemployed” to reduce poverty.He described the framework as an important initiative that falls directly in line with the DBN Act, to support and take key steps to develop Namibia’s key economic sectors; and urged the bank to focus on the tourism and service industries, in order to enhance the country’s competitiveness regionally and internationally.Pohamba encouraged the business community to be more innovative in its approach, cautioning that “It makes little sense for all of us to be shebeen owners.”Pohamba also highlighted the potential of the framework by stating that during the past year, the bank had funded N$52,35 million to emerging businesses to execute projects to the value of N$300,5 million, thereby creating over 2 500 permanent and 1 600 temporary jobs.Through the new Microfinance Framework, N$42 million will be made available to credible microfinancing institutions to extend their products countrywide.Nuyoma emphasised the timeliness of the framework in the context of the global financial environment, stating that it “comes at a time when the most economically marginalised Namibians are feeling the pressure of rising costs of living.At the same time, Namibia is on the cusp of a wave of growth, spurred by implementation of the SADC Free Trade Agreement, and renewed international interest in the growth possibilities of the SADC economy.”He added: “Although all the broader economic signals are promising, and major investments have been made in infrastructure and an enabling environment for large-scale industry, small scale enterprise is vital to ensure that Namibians are able to weather the present economic difficulties, and that they are able to grow alongside larger, more formalised sectors of the economy, gradually entering formal sectors in the medium to long term.”The president also inaugurated the new head office of the DBN at 12 Daniel Munamava Street in the Windhoek CBD.The Namibian Government transferred ownership of the building to the DBN through a 2004 Cabinet decision and as part of its equity contribution in the bank, and staff of the bank moved into the premises in May this year.While there are already a number of micro-lending institutions in the country, the Support Framework aims to enhance the extent and the reach of lending by presenting an additional source of capital.According to DBN’s CEO, David Nuyoma, “The history of industrialisation shows time and again that although large-scale industry is crucial, diversity and strength of micro and small-scale enterprises are baseline indicators of the potential of an economy to develop, grow and attain long-term stability.This is what the DBN has set out to support and achieve with the implementation of the Microfinance Framework.”But history has also shown that loan sharks and dodgy microlenders do exist, often limiting the ability of micro and small-scale enterprises to effectively develop into their full potential.A 2005 report by the Namibia Economic Policy Research Unit advised that both regulators such as the Namibia Financial Institutions Supervisory Authority and practitioners should explore and promote ways that microfinance institutions can reduce costs while controlling the integrity of the loan portfolio in order to prevent such incidences.To this effect, DBN has responded by restricting access to the available capital to organisations that operate in the interest of development, and with responsible lending policies.Launching the product, President Hifikepunye Pohamba explained that the framework “is not intended for loan sharks, but for developing specialised micro financing institutions committed to economic development and to extending financial support to segments of society in rural communities, the youth and the unemployed” to reduce poverty.He described the framework as an important initiative that falls directly in line with the DBN Act, to support and take key steps to develop Namibia’s key economic sectors; and urged the bank to focus on the tourism and service industries, in order to enhance the country’s competitiveness regionally and internationally.Pohamba encouraged the business community to be more innovative in its approach, cautioning that “It makes little sense for all of us to be shebeen owners.”Pohamba also highlighted the potential of the framework by stating that during the past year, the bank had funded N$52,35 million to emerging businesses to execute projects to the value of N$300,5 million, thereby creating over 2 500 permanent and 1 600 temporary jobs.Through the new Microfinance Framework, N$42 million will be made available to credible microfinancing institutions to extend their products countrywide.Nuyoma emphasised the timeliness of the framework in the context of the global financial environment, stating that it “comes at a time when the most economically marginalised Namibians are feeling the pressure of rising costs of living.At the same time, Namibia is on the cusp of a wave of growth, spurred by implementation of the SADC Free Trade Agreement, and renewed international interest in the growth possibilities of the SADC economy.”He added: “Although all the broader economic signals are promising, and major investments have been made in infrastructure and an enabling environment for large-scale industry, small scale enterprise is vital to ensure that Namibians are able to weather the present economic difficulties, and that they are able to grow alongside larger, more formalised sectors of the economy, gradually entering formal sectors in the medium to long term.”The president also inaugurated the new head office of the DBN at 12 Daniel Munamava Street in the Windhoek CBD.The Namibian Government transferred ownership of the building to the DBN through a 2004 Cabinet decision and as part of its equity contribution in the bank, and staff of the bank moved into the premises in May this year.