DBN will not award loans to SMEs without collateral – Windhoek Observer

Martin Endjala

The Development Bank of Namibia (DBN) has clarified its position regarding the Small Medium Enterprise (SME) loan scheme, stating that collateral is a mandatory requirement for all applicants.

This announcement comes amid frustrations voiced by several entrepreneurs who have faced loan rejections due to the absence of collateral.

DBN’s Head of Marketing and Corporate Communications, Jerome Mutumba, explained to this publication that collateral is a standard requirement across financial institutions. It serves as security for the bank and helps mitigate lending risks.

“In cases where borrowers are unable to repay the loan, the bank can recover the debt through the collateral. This also ensures a commitment from the borrower, increasing the likelihood of loan repayment,” Mutumba stated.

He further elaborated that collateral aligns the interests of both the borrower and the bank.

The value of the collateral is often directly linked to the loan amount, promoting responsible financial behaviour and signalling the bank’s investment in the borrower’s project or business success.

Looking ahead, Mutumba acknowledged the challenges posed by the collateral requirement in the SME loan scheme.

The DBN is implementing a strategy focused on three pillars: mentoring and coaching, a credit guarantee scheme, and a venture capital fund.

“These initiatives are designed to bridge the financing gap faced by SMEs,” he assured.

In light of the expected economic slowdown this year, Mutumba advises businesses to reinforce their financial positions.

This includes reviewing cash flow, cutting unnecessary expenses, and maintaining a healthy financial buffer to navigate economic uncertainties.

He emphasizes the role of innovation in driving growth, even in challenging times. Businesses should embrace technology and innovation in processes, products, or services to stay competitive and adapt to changing consumer preferences.

Mutumba stated that the success of SMEs in 2024 will depend on strategic foresight, adaptability, and a proactive approach to managing both opportunities and risks.