Startups And SMEs In Namibia Have A New Credit Guarantee Scheme Of Up To $5.6 Million

August 19, 2020

Startups and SMEs in Namibia can now have their loans with banks guaranteed to the tune of 98 million Namibia dollars (5.6 million U.S. dollars). The country’s Finance Minister, Iipumbu Shiimi announced the commencement of the credit guarantee scheme for small, medium enterprises (SMEs), which will provide a collateral cover of 60 percent for qualifying SMEs applying for finance from participating commercial finance institutions.

Namibia's Finance Minister, Iipumbu Shiimi
Namibia’s Finance Minister, Iipumbu Shiimi

Here Is What You Need To Know

  • According to Shiimi, the reason for the credit guarantee scheme is that there are SMEs with excellent prospects for success and viable business plans, but lack the necessary collateral to obtain loans.
  • Shiimi said that the scheme is a smart partnership between the Development Bank of Namibia(DBN), Namibia Special Risks Insurance Association(NASRIA), and participating financial institutions.
  • The smart partnership will be funded with 98 million Namibia dollars (5.6 million U.S. dollars) seed capital from the government and the Bank of Namibia.
African Guarantee Fund To Guarantee The Restructuring Of Loans For ...
For banks, as Figure 1 shows, lack of collateral and high default rates are the main challenge in lending to SMEs. Credit information gaps and high cost of monitoring borrowers together are cited by 16 percent of banks in the survey. Outside of SME specific constraints, increasing bank lending to the public sector in recent years has crowded out private sector lending in some countries, affecting SME lending in particular.

Read also: Read also: Silicon-Valley Based Startup Accelerator Opens First Founder Institute In Namibia, Calls For Applications.

  • According to Shiimi the 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 these seriously challenging times of economic downturn and COVID-19.
  • Meanwhile, DBN CEO Martin Inkumbi said the scheme is designed to provide widespread access to SME borrowers, and so participation was offered to private-sector lenders such as First National Bank and others.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Tags: ,