The Namibia Local Business Association (NALOBA) Vice President, Peter Amadhila commended the Development Bank of Namibia (DBN) and the German Development Bank’s (KfW) initiative to introduce a 12-months free interest loan for businesses in the county.
“As an association of native businessmen and women in Namibia, NALOBA would like to applaud the greatest initiatives taken by the Development Bank of Namibia and KfW to give recovery loans six percent interest-free on the first 12 months”, Amadhila said during an interview with the Windhoek Observer.
He says this demonstrates the bank’s trust in the Namibian business community and a “total true fight” for the Namibian economic recovery.
Equally, NALOBA further applauded the government through the Bank of Namibia for availing N$ 500 million through commercial banks for Small and Medium Enterprise (SME) recovery loans.
“The association hopes the requirements are not cumbersome as usual, which could result in a mere “jam smear on the lips”, Amadhila emphasized.
He has since urged NALOBA members and the Namibian SME sector, to make use of the opportunity , which he says is a noble one, revive and boost their business operations.
Last week DBN and KFW announced the backed-recovery loans for businesses, which have been further subsidized in response to calls by businesses for access to affordable credit and will now include a 12-month interest-free period following disbursement of loans.
These loans are supported by KfW and are distinct from the Bank of Namibia SME economic recovery loan scheme.
However, DBN is expected to make a statement on its participation in the Bank of Namibia SME Economic Recovery Loan Scheme (ERLS) in the near future.
The business recovery loans currently have a term of up to 32 months and a fixed interest rate of 5.925 percent. Effectively, this means that recovery loan borrowers will only pay interest for 20 months. The 12-month portion of interest will not be recapitalized for payment in the final 20-month period of the loan.
Subsequently, the interest subsidy does not subsidize the capital amount of loans, so borrowers will be required to pay the capital amount over 32 months, unless a grace period is granted by DBN, depending on the merit of the project financed.
The Bank launched its Business Recovery Loans Facility in 2022 to assist eligible non-agricultural businesses to overcome financial challenges caused by adverse macroeconomic conditions over the past years. And it succeeds the Covid-19 facility that was launched in 2021.
The recovery facility is enabled by German Development Cooperation and its financial cooperation entity KfW. The facility is part of a series of measures initiated by the Ministry of Finance to help businesses overcome the financial challenges caused by the prevailing adverse macroeconomic conditions.
Meanwhile, DBN’s Chief Executive Officer, Martin Inkumbi, said that the loans were intended for the acquisition of plant and equipment, as well as working capital and other short-term finances, to strengthen enterprises.
He further stressed diversification and expansion, so that businesses can become more resilient to future economic shocks.
In addition to this, he is of the view that business and consumer environments have evolved and adapted during Covid-19, and the business recovery loans can be used to develop and launch sustainable, innovative new products and services.
Inkumbi noted that the shorter duration of the loan places the onus on existing enterprises to select uses that can be quickly implemented with a rapid, positive impact on business outcomes and revenues.
Furthermore, the CEO added that the loan will not apply to start-ups.
“This is a loan specifically geared to boost existing enterprises that have been affected by the difficult economic environment”, he said.
Inkumbi maintained that Startups should apply for normal SME finance or larger amounts of finance from DBN’s investment department.