Windhoek - The Namibian Ministry of Finance on Wednesday launched a financial strategy for the small and medium Enterprises (SME), an initiative that will see SMEs accessing credit lines without collateral and young people receiving mentorship on growing business.
The strategy is an offspring of the Namibia Financial Sector Strategy and a joint partnership framework between the public and the private sector financiers. It was launched together with two other mutually-reinforcing and impactful products namely; the skills-based lending facility for the youths and the funding facility for the 121 Constituency Youth Enterprises.
The facilities will start operating on 1 December. Speaking at the launch, Minister of Finance, Calle Schlettwein, said the facilities and strategy which were a platform for youths empowerment would be implemented in collaboration with the Development Bank of Namibia (DBN).
“The bid for a designate SME Financing Strategy and the specific funding facilities for youth enterprises is to unlock the growth, job creation and self-employment potential of the SME sector. Further, the policy imperative is to achieve the twin objectives of enhancing access to affordable finance and fostering entrepreneurship and SME development across the broad range of economic sectors in all regions of the country,” said Schlettwein.
“In furtherance of these objectives, and to greatly diversify financing sources for entrepreneurs and micro, small and medium enterprises (MSMEs), an SME Financing Strategy was crafted with a suite of tailor-made products and services to better serve the needs in the Namibian SME ecosystem.”
He said the SME financing strategy encompasses three mutually reinforcing facilities which are the Credit Guarantee Scheme to provide for collateral for MSMEs without a collateral base; the Venture Capital Fund, to provide for equity capital to high-growth SMEs whereby the government assumes the first loss; and the Mentorship and Coaching Programme to provide requisite capacity-building and mentorship for participating MSMEs.
Schlettwein said the Bank of Namibia had played a key role in spearheading the formulation of the strategy and is also contributing to the pooling of resources to jump-start the strategy.
He said the skills-based lending facility for the youths, which will be hosted by the Ministry of Finance in collaboration with DBN, targets youths aged 35 years at the time of application. The programme targets young artisans such as plumbers, mechanics, technicians, fitters and turners, among others, who graduate from vocational education training as well as young professionals such as pharmacists, medical doctors, lawyers and engineers graduating from institutions of higher learning. The percentage of the proportion will be about 60% to artisans and 40% to professionals.
“The youths will have initial starting size of $30 million, to be scaled up over the short to the medium-term. The government will ensure that the products are inclusive of women and youths with disability, cover both start-ups and existing businesses for as long as they are viable, and relax lending terms, collateral and own equity requirements,” added Schlettwein.
He said the funding facility for 121 Constituency Youth Enterprises will hosted by the Ministry of Sport, Youth and National Service in collaboration with DBN. The facility aims to facilitate the establishment of 121 youth enterprises in all the country’s constituencies, in line with the aspirations of youths enterprise development sub-pillar of the Harambee Prosperity Plan.
“As such, the facility will foster the establishment of youth owned enterprises in both urban and rural constituencies of the country, thus contributing towards employment creation, entrepreneurship development and SME-driven economic growth on the back of the youthful demographic dividend,” said Schlettwein.
“The facility will, as a start, provides funding for at least one project from each of the 121 constituencies nationally, to be scaled up over time, commence at a total size of N$8.5 million, to be scaled up over time once bankable projects are identified and assessed. Such funding would also support the project preparation and assessment for bankability. Project identification and initiation would start at the constituency level, in collaboration with the Ministry of Sport, Youth and National Service as well as the National Youth Council.”
He said the Credit Guarantee Scheme will be rolled-out in collaboration with the Namibia Special Risks Insurance Association (NASRIA). The scheme is of particular significance in addressing the binding constraints posed by the lack of collateral for qualifying SMEs.
“The facility will provide collateral cover for qualifying SMEs, and commences at an initial size of N$100 million, for which N$2 million will be dedicated to the establishment of a database for SMEs. The facility size will be scaled up over the medium-term through greater public and private sector support. I must emphasize the operational modalities of the Credit Guarantee Scheme. SMEs and entrepreneurs will still continue to apply for credit at commercial banks. It is the financial institutions which will apply for collateral coverage for the assessed bankable projects which have high growth potential, but lack collateral,” he said.
He said the mentorship and coaching programme will provide tailored training and capacity-building for beneficiaries of these facilities. Training and mentorship will be extended either directly by DBN or through specialised service providers in coordination with similar existing initiatives at the Ministry of Industrialisation, Trade and SME Development as well as the Empretec.
The initiative, Schlettwein said, has long lasting beneficial impacts for SMEs, entrepreneurs and the economy in general in the form of wealth and job creation.
He urged all stakeholders to have greater synergies, prudent financial management and monitoring and evaluation during the implementation process.
The Finance Minister also expressed gratitude to all the collaborating institutions for effectiveness in the process of conceptualising the targeted financing facilities.