By Josef Kefas Sheehama
The SME Economic Recovery Loan Scheme was reintroduced on February 2, 2023, by the Bank of Namibia and the Ministry of Finance and Public Enterprises, with a share capital of N$500 million. In November 2020, the first plan was introduced, but it was a failure due to strict eligibility requirements and a lack of information that was adequately reflected across the fourteen areas.
In addition to other things, the newly created SME Economic Recovery Loan Scheme is intended to give small and medium-sized firms access to government-guaranteed loans to aid in their ability to recover from the effects of COVID-19. We must acknowledge that the lockdown has greatly decreased economic activity. The interruption of the supply chain has made the cash conversion cycle for SMEs lengthier. For the continuation of their operation, SMEs must also continue to pay ongoing expenses like office rent and personnel salaries. SMEs are suffering losses as a result, and they are delaying debt payments. Some SME businesses closed their doors, which increased unemployment. To lessen the effects of business interruptions, maintain employment, and take precautions for the uncertain future, the SMEs’ urgent cash needs have been rising dramatically. SMEs employ and pay roughly 160,000 individuals, or about one-third of the workforce in the country, in some capacity. Approximately 60,000 individuals are employed full-time in this industry at the moment. Most SMEs in Namibia work in the retail sector, selling goods like food and household items with little to no substantial value-added activity. Therefore, the government must acknowledge the contribution that small enterprises may make to the national economy and wealth creation from the outset and regard this contribution as integral to economic development. The need for a simplified business registration process that can lead to an increase in the number of businesses registered in Namibia cannot be over-emphasized.
I would like to take a minute to applaud the Bank of Namibia and the Ministry of Finance and Public Enterprises for a job well done in relaunching the SME Economic Recovery Loan Scheme. I am an independent economic and business researcher. Additionally, SMEs can apply for the loan program through their banks, including Bank Windhoek, First National Bank, Standard Bank, and Nedbank. The scheme’s goal is to give banks the ability to offer SMEs less expensive credit so they can recover, rebuild, and make investments for the future. According to the Bank of Namibia, the banks would be given access to loans between $50,000 and $10,000,000 based on the balance sheet of the SME and subject to the banking institution’s credit evaluation. The loan amount is linked to the current prime lending rate which is 10.50%, however, the Bank of Namibia proposed a prime lending rate minus 50 basis points. For example, prime minus 0.50% at today’s rates means 10.50% – 0.50% – an effective rate of 10.00% interest. If the repo rate goes up by 0.5% and the banks increase prime by 0.50% as well, that loan would still be prime minus 0.50% but would have an effective rate of 10.50% (11% – 0.50%).
Henceforward, SME Economic Recovery Loan Scheme focus on businesses with a turnover of not more than N$60,000,000.00 per annum. All financial institutions around the world can only provide funding to registered and well-directed businesses that are to return the borrowed money and realize their intended goals and objectives. Thus, every country in the world has its laws that it requires compliance with, regardless of a person’s status or class. Laws are a set of regulations that are usually documented, such that everyone, whether a citizen or a visitor of any kind must comply with them. Partnership and collaboration can go a long way in creating a strong and better economic recovery. The SME owners need to keep proper financial information. Your bank will not extend the facility if you cannot provide Annual Financial Statements and Cash Flow Projections. It is impossible to run a business without recording financial information. Good financial information allows one to get a clearer picture of a company.
Therefore, the government that adopts a shared value mindset generating economic value in a way that also produces value for society by addressing its challenges, will be positioned to sustain, compete, and thrive in domestic markets. Private-public collaborations that show a clear benefit for business and society are important ingredients to restore trust in government.
Moreover, all governors, councillors, and mayors need to come to the party. They are not elected to be office-bound. Innovation, creativity and agility need to be cherished and celebrated. They need to provide SMEs with valuable expertise and guidance, and help businesses develop leadership skills and build strong teams. Equally, mentorship and coaching programs can foster innovation and entrepreneurship, contributing to a dynamic business environment. Against this background, there is a need for an SME information Centre to be established across all fourteen (14) regions specifically to provide information to the SMEs on developments relating to market movements, and the latest developments and assist in linking SME operators to the service providers at affordable rates. Thus, regional leaders must integrate the informal economy issues into the overall youth development issues rather than isolating the youth and the informal economy.
Across all regions, SMEs do more than create employment. They are also engines of economic growth and social development. SMEs contribute more than 12% of GDP, and some global estimates put this figure as high as 70%. This contribution varies across sectors and is particularly high in the service industry, where SMEs account for 60%. SMEs are a vital lifeline in a country, as they represent the grassroots that keep the local economy going by encouraging growth, employment and income.
In conclusion, SMEs are a vital engine in the Namibian economy. They drive growth, create employment and spearhead innovation. They can leverage their agility to design and incubate new technologies and business models to build a better future.
SMEs have the potential to become large corporations and need to continue on their path to growth and prosperity. It is imperative therefore that efforts to protect SMEs move with speed and decisiveness not only to cushion the worst of the impacts of the crisis on livelihoods but to help ensure a swifter recovery for the broader economy.
Therefore, the relaunched of the SME Economic Recovery Loan Scheme will help ensure government continue to provide much-needed finance to SMEs across all fourteen (14) regions, creating jobs and driving economic growth.
