Shiimi launches Credit Guarantee Scheme for SMEs

Staff Writer

Finance Minister Iipumbu Shiimi has announced the commencement of the Credit Guarantee Scheme for SMEs.

The scheme will provide collateral cover of 60 percent for qualifying SMEs applying for finance from participating commercial finance institutions.

“The rationale behind the Credit Guarantee Scheme is that there are SMEs with excellent prospects for success and viable business plans, but lacking the necessary collateral to obtain loans. Commercial finance institutions require the security of collateral to ensure that their capital is preserved in the event of an SME being unable to repay their loans. By insuring credit granted to qualifying SMEs, the Scheme substantially reduces the collateral requirement for qualifying SMEs.”

Shiimi said the scheme which will be funded with N$98 million seed capital from government and the Bank of Namibia, will be a smart partnership between Development Bank of Namibia (DBN), Namibia Special Risks Insurance Association (NASRIA) and participating financial institutions.

“SMEs will have to apply for business loans at participating financial institutions. Upon being assessed as bankable and only lacking collateral, the SME can be considered for collateral cover of 60 percent of the principal loan amount,” he said.

“To date, the scheme will be available from First National Bank of Namibia (FNB). A second financial institution has been approved for participation in the scheme, but will only be able to make the scheme available once contractual matters are finalised. More financial institutions are expected to adopt the Credit Guarantee Scheme in the near future, once they have more fully considered their participation in the scheme.”

Development Bank of Namibia (DBN) CEO Martin Inkumbi said the scheme is designed to provide widespread accessibility to SME borrowers, and so participation was offered to private sector lenders such as FNB and others.

“ SMEs will be assessed in line with the participating financial institution’s credit (business loan) risk policies and procedures,” he said.

Asked why the scheme was not offered through DBN, Inkumbi said ,”the Bank already offers relaxed collateral requirements, and that a wider spread of financial institutions offering the scheme would enable the smart partnership to reach more SMEs.”

The scheme will be underwritten by NASRIA Ltd., a key partner for the participating financial institutions while DBN provides expert support during the adjudication of claims.

“The Credit Guarantee Scheme was declared as a special risk to be underwritten by NASRIA Ltd. NASRIA Ltd was established when the short-term insurance industry and the Government joined forces in 1987. Its mandate is to provide special risks insurance cover and to bring about social and economic changes,” Peter Grüttemeyer, Board Chairperson of NASRIA Ltd said.

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