BoN re-launches SME Economic Recovery Scheme after poor loan uptake

The central bank, Bank of Namibia has re-launched the SME Economic Recovery Scheme, a revamped scheme designed to be more inclusive and accommodating and to provide general support to the SME sector.

The Bank has partnered with local banks in what the Bank has said is “crucial for the revival of the SME sector by providing increased access to financing.”

The original scheme was launched more than two years ago, in November 2020, to assist SMEs buckling under the weight and pressure exerted by the ripple effects of the Covid-19 pandemic. The primary aim of the scheme then was to provide funding to qualifying SMEs to cover certain fixed costs and to provide working capital to preserve the sector and provide sustenance during the lockdown periods.

A total loan amount of N$500 million was availed through the scheme, accessible to SMEs via participating banking institutions. However, since the scheme’s inception, only a total of N$ 6.4 million was utilized for this purpose, despite the pleas from SMEs to access financing.

“As an industry, we went back to the drawing board to listen and learn through rigorous consultations with various stakeholders, including – the participating banks, the Bankers Association of Namibia (BAN), the Business Rescue Task Force (BRTF), and SME representative associations – to gauge the challenges the SMEs were facing with regards to qualifying for and accessing the scheme.

“The input received played a vital role in the structural redesign of the scheme to ensure that viable businesses are assisted. During these consultations, several areas for improvement were identified with the design and rollout of the scheme, which, in turn, affected the success and uptake of the original scheme,” Johannes !Gawaxab, Governor of the Bank of Namibia said at the re-launch.

He went on to emphasise the need for all key stakeholders to play their respective roles in developing SME support programmes aimed at optimising access to financing to support the continued recovery of the domestic economy.

“SME assistance is pertinent to support accelerated economic diversification and the creation of new jobs, especially for our youth in both urban and rural areas. At the Bank of Namibia, we are committed to ensuring financial stability and stable inflation, facilitating sustainable growth and development to benefit all businesses, big and small. And to the businesswomen and men braving this entrepreneurial journey during the current economic climate, I implore you to keep fighting that good fight with triumphant 6 Public character, perseverance, and hope. I would like to remind you that challenges are an opportunity to test yourself and rise to the next level,” he added.

SMEs play a vital role in any nation’s economic advancement and employment creation, as they are the economy and job creation’s lifeblood. According to data from the World Bank, SMEs represent around 90 percent of businesses and more than 50 percent of employment worldwide, with these figures being even more pronounced for developing economies.

 A 2017 International Finance Corporation study on micro, small, and medium enterprises (MSMEs) estimated that there are approximately 71,000 MSMEs in Namibia. MSMEs provide employment and income to around 160,000 Namibians, accounting for approximately one-third of the country’s workforce and contributing to 12 percent of GDP.

“For the SME sector to thrive and optimise its contribution to economic growth and development and job creation, access to financial services and adequate financing is, without a doubt, very crucial. In fact, limited access to financial products and services is highlighted as a critical constraint faced by around 40 percent of companies operating in this sector, according to a study conducted by the International Finance Corporation Public (IFC) in 2017. Namibian policymakers are aware of this constraint. Therefore, against that backdrop, the SME sector has been identified as one of the priority areas to be addressed in Vision 2030, the Namibia Financial Sector Strategy (2011 – 2021), and the Harambee Prosperity Plan,” further explained !Gawaxab.

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