DBN loan write-off not practical – Grobler

…Bank owed over N$ 500 million by SMEs

• By Erasmus Shalihaxwe

THE Development Bank of Namibia (DBN) Corporate Communication and Stakeholder Relations Specialist, Di-Anna Grobler says the bank cannot afford to write-off loan in arrears from the N$ 500.5 million it is owed by Small and Medium Enterprises (SMEs) which applied for financial assistants to boost their businesses but are now finding it hard to honour their loans.

Grobler revealed this in recent interview with Confidente while discussing the bank’s working relations with SMEs in the country.

She said a total of 398 SMEs owners applied for business funding between January 2021 and October 2022 and of the 398 applications received, only 203 applicants were approved.

“About 157 applicants were rejected for various reasons during the same period,” she said.

Grobler said the bank’s objective was to finance projects and business enterprises which after evaluation are estimated to have a high probability of success.

“Reasons for declining loan requests may include unsustainable business plans and unreasonable cash flow projections, as well as insufficient skills to run the business. The bank is an ethical lender, therefore the bank decline applications that may put the financial wellbeing of borrowers at risk. If a business fails, the bank has to take possession of collateral and this creates financial difficulties for the borrower, the borrower’s family and employees. If a loan application is declined, feedback is therefore communicated to the applicant,” Globler said.

She added that a total number of 152 SMEs are up to date with their loan repayments, while 133 are not in arrears, to which many SMEs are blaming the current challenging business environment which had resulted in high unemployment and high inflation.

“These are given as reasons why SMEs are not generating enough revenue to service all their debts on time. DBN is in constant engagement with borrowers to find repayment arrangements suitable for both parties. A total of N$153.5 million is still owed to the Bank by 59 SMEs struggling with repayments. The Khomas region has the largest number of SMEs struggling to repay their loans, followed by the Karas region,” Grobler explained.

Recently the bank launched a business rescue programme for qualified businesses as a possible alternative to help them avoid liquidation. The program takes the form of partial conversion of debt into various types of preference shares to be held by the DBN in the enterprise to which the bank would deploy independent managers to entities to render technical and management advisory services.

During the launch, DBN Chief Executive Officer (CEO), Martin Inkumbi, said the combination of prevalent unfavourable economic fundamentals have left many businesses at the point where they are barely able to operate and the bank had a duty to recover its capital so that it can make further loans to other borrowers.

“At this point, the bank gives regards to employment opportunities created, income for owners, preservation of owners’ capital and assets, contributions to local, regional and national economies and continued economic growth as reasons to preserve businesses. The bank does everything it reasonably can to preserve businesses that it has financed and where possible, creates a win-win situation for the borrower and the bank,” Inkumbi said.