Saturday 17 April 2021
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FNB’s collateral free loans a boon for SMEs

…N$100 million ring-fenced for SMEs

Just days after the United Nations adopted the International Day of SMEs, the country’s largest commercial bank, FNB Namibia, launched its SME Special Fund through which it has ring-fenced N$100 million which is accessible to small businesses with no collateral requirements.
Although in a free market economy Government cannot offer jobs and capital for all, in Namibia small and medium enterprises continue to play a catalytic role in the growth of the overall economy of the country.
According to FNB, the fund is designed to cater for the distinctive financial and capital requirements of SMEs. The funding portal is also expected to address the need for financing, or lack of access to financing, by targeting entrepreneurs who have bankable business proposals but who lack collateral.
Applicants would not need to produce collateral security, but rather financial and technical proposals upon which support from the bank will be provided to ensure the sustenance of the funded projects in the long run.
FNB Namibia’s Head of SME & Business Development Sam Ikela launched the funding scheme at the bank’s headquarters this week whereby he announced that the bank is ready to relax some of the credit extension regulations to accommodate small businesses.
He said although the bank had to slightly adjust its risk appetite, the Fund holds the potential to boost SME growth.
“We understand the particular needs and preferences of SMEs and have developed tailored value propositions to overcome the historical challenges of high credit risk and cost to serve. The Bank’s strategic intent is to, Transact, Invest, Lend and Insure and is not only focused on SME Lending but also prioritised non-lending products in order to provide total customer value,” Ikela said.
For upcoming entrepreneurs, Ikela said it is important to “centre your focus on the future of the business in order to ensure its sustainability; reinvest in your business cycle to grow the business year on year; and have a well prepared business plan for your product or service which must have good market potential.”
Ikela pointed out that the SME Special Fund also compliments President Hage Geingob’s Harambee Prosperity Plan.
“Under pillar two there is a line which talks of improving access to financing for SMEs, this is our contribution to that,” he said.
According to HPP’s pillar on Economic Advancement, there is a need for non-collateralised lending for start-ups with potential to overcome the challenge of collateralised lending which is a big obstacle for broader growth oriented SMEs. The Ministry of Finance has since been tasked to expedite the SME Financing Strategy, which aims to establish a Venture Capital Fund, a Credit Guarantee Scheme and the Challenge Fund [latter is a Training and Mentoring Fund aimed to build capacity in the business development service market, as well as enhance accessibility and affordability of those services to SMEs].
Ikela also pointed out that extensive technical assistance will be provided to SMEs who meet the funding requirement to ensure that their business ventures are a success. “The objective of the SME Special Fund is to support, develop and grow the SME sector by providing the necessary financial and technical assistance. We will not only focus on funding but also on technical assistance. One of the problems that we experience in the sector is the training aspect, the business management capabilities of our SMEs,” he said.
He also encouraged people living in rural areas to make use of the fund. To keep track of the business progress, Ikela said businesses funded under the scheme will be compelled to provide quarterly reports which will be closely scrutinsed.
FNB’s Chief Marketing Officer Tracy Eagles underscored the importance of SMEs in the growth of the country’s economy.
Eagles said banks have for long known the importance of SMEs but they never really addressed the funding model for SMEs without collateral.
“In terms of the UN Day for SMEs, for a long time we knew SMEs are the nation’s engine of growth but we never really understood what it meant. We provided training and partnered them in other ways but none of that really answered the funding question. This is about solving the money issue for the customer,” said Eagles.
She continued: “Now we are saying to the customer, we have the money and we are willing to help you if we think you have a great idea. It is good UN adopted SME Day, but in a country like ours every day is SME Day.”
Some of the requirements to access funding include a business plan, cash flow projections, business financial statements, personal balance sheet, and company registration documents.
Those who meet the funding requirements will also have to undergo compulsory ‘SME Compete’ guidance for upskilling.
SME Compete is a consultancy firm which aims to improve entrepreneurial, management, marketing and information technology skills of SMEs.
According to its profile, SME Compete also helps clients overcome challenges typically encountered during the course of conducting business, SME Compete has developed an array of services focused on capacity building, skills enhancement and growing business.

Conditions of the Special Fund:
SMEs, for the purpose of this fund, shall be defined in accordance with the National Policy on Micro, Small and Medium Enterprises in Namibia in conjunction with FNBs own SME Credit Policy/target group for the loan
The size of the facilities shall range between N$100 000 and N$3 million
The SME Special Fund is available for bridging financing, working capital financing, long term business loans, asset base financing and leverage financing
Loans shall have a minimum maturity of one year and a maximum maturity of 5 years
The scheme is eligible for both existing and new projects and clients

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