Development Bank of Namibia (DBN) has announced that Business Recovery Loans 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, the German Development Bank, and are distinct from the Bank of Namibia SME Economic Recovery Loan Scheme. DBN is expected to make a statement on its participation in the Bank of Namibia SME Economic Recovery Loan Scheme 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%. 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.
In a statement, DBN explained last Friday that 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 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 macro-economic conditions over the past years. 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 macro-economic conditions.
Martin Inkumbi, DBN CEO says, on the Business Recovery Loans launched in mid-2022, the loans “were intended for acquisition of plant and equipment, as well as working capital and/or other short-term finances to strengthen enterprises.”
He also points to diversification and expansion so that businesses can become more resilient to future economic shocks.
Finally, he says that the 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 says 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.
But Inkumbi stresses 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 says.
Start-ups, he concludes, should apply for normal SME finance or larger amounts of finance from DBN’s Investment Department.
In the photo: DBN CEO Martin Inkumbi