DBN’s new lending chief’s geared for new challenges

THE Development Bank of Namibia (DBN) established in 2004, provides finance for viable enterprises and sustainable initiatives that contribute measurably to the development of Namibia.

The bank has spearheaded new development ventures in the country with finance for private sector start-ups and expansions, equity deals, bridging finance, and enterprise development finance among other things.

However, the bank has been at the receiving end of the different sectors because of its lending policies, pace and initiatives.

Recently, the DBN responded to its critics by creating the position of Lending, as one of its executive arms, in order to deal with the recurring questions on its lending objectives.

Martin Inkumbi this January became DBN’s first Head of Lending.

Armed with a B.Com degree from UCT in Economics and Management Accounting, a postgraduate Diploma in Finance and Banking as well as a Masters degree in Finance Economics, Inkumbi this month takes stock of his first four months in office.

His immediate job description involves developing and managing the lending and financing functions of the bank.

The functions include, among others, establishing lending and financing policies and procedures, developing financing products and services, managing the lending process from credit risks evaluation as well as loan monitoring and collection, besides, the overall management of this new division.

“The lending function is central to the objective of the DBN, which is to avail development finance for economic activities in Namibia. Ultimately that is the core function of the bank,” says the 38-year old.

His division is the interface between the bank and the society at large as entrepreneurs first encounter the Lending division when dealing with DBN.

Adds Inkumbi, “It is important to understand the needs and challenges facing entrepreneurs seeking assistance from DBN. The kind of business projects, we are called on to consider financing and the risk profiles for such business projects are extraordinary sometimes.”

Inkumbi has been in the banking industry for over 12 years having worked at Bank of Namibia as a Financial Analyst and then the First National Bank (FNB) as Manager Corporate Affairs.

“Lending policies are ultimately determined by the Bank’s Board of Directors. The Head of Lending does not single handedly decide on the lending policies. Therefore, the lending policies will not change because of my coming into this position.

In my opinion, the challenges the Bank faces are not due to inappropriate policies, but rather the need to oil our wheels, such that we are able to provide solutions to our clients,” he says.

Inkumbi’s division now aims to improve turn-around times for loan applications, without compromising the risk evaluation process and the quality of the loan book, as he cautions on maintaining the sustainability of the bank.

DBN’s Lending Division as well as the Business Support and Development, were both part of the Operations Division, until January when Inkumbi took over as Head of Lending.

The Lending division focuses on the money lending function, while the Business Support and Development provides support to entrepreneurs who need assistance with the development of their business concepts, or to determine an appropriate funding structure.

Not all entrepreneurs understand the lending procedures, while others accept the procedures with difficulty, he says.

“The main challenge now is that the buck stops with me, as far as decision making in the division is concerned. We have the big task of financing development activities in the country and to improve service delivery, and it is expected sooner rather than later. To improve the quality of service requires the fine-tuning of the lending process and also the working culture of the team. It’s a challenge but not a problem.”

However, besides the worries of the limited financial capital in the bank to advance as loans, the new Lending Chief has over the past four months on the job become increasingly worried by the limited accessibility to the bank which only has representation in Windhoek and Ongwediva.

For him, the cost of accessing a loan for an SME based in Katima Mulilo can be high compared to one in Windhoek, if that Katima based entrepreneur has to travel to Windhoek to speak to the DBN.

Banks in developing countries, the dominant source of finance for investment, have a disturbing tendency to lend too little or too much, resulting in unnecessarily low rates of investment and growth, and unnecessarily frequent financial and economic crises.

For Namibia, this is no exception; according to Inkumbi, the problem is that of lending too little.

“This is the outcry from micro-businesses, SMEs and some medium to large businesses. There are perceptions that the risks of doing business in developing countries are high, hence banks are reluctant to lend money or they hike the cost of borrowing.

“The fact that banks in many developing countries are not owned and controlled by locals increases this problem. Because, the decision makers, who usually sit in foreign countries, are not very familiar with the local business environment, all they see from a distance is risk, and therefore they instruct their bank managers to be careful.

“There are also oligopolistic tendencies, the supply of banking services by a few, which stifle competition and keeps the cost of borrowing high.”

He adds that banks pride themselves for being prudent lenders, which they cite as the reason they have not been badly affected by the financial crisis experienced by many banks across the globe, but calls for room to increase lending for business activities.

Martin Inkumbi has been with the DBN for the past five years in the same department, although not called lending then, but performing more or less the same function; a period over which DBN has grown its loan book to N$ 1 billion, before this recent promotion.

“SMEs face challenges in accessing finance for a number of reasons, among others small balance sheets, they cannot back up the loans required with security, and because they are usually a one-man owned business, their financial backing is also limited. The DBN has created products to finance SMEs with less odorous requirements. For example, our bridging finance product enables us to fund SME contractors without insisting on any security, provided their employers are willing to pay progress payments directly to DBN,” says Inkumbi.

Invoice discounting is a DBN product which assists SMEs who have to wait for 60 to 90 days before they can receive payments for deliveries of products or services to their customers.

And Government ministries are often the culprits when it comes to taking too long to paying SMEs after the delivery of a service or product as SMEs cannot dictate terms for their big customers or else they may not get business the next time around, so their business is affected.

He adds, “If an SME with little financial backing is not paid for 60 days while salaries, rent and suppliers need to be settled, such an SME can go out of business quickly.”

DBN’s invoice discounting products therefore assist SMEs who have done work, but are waiting payments from customers. DBN discounts such invoice and advance funds to the SME. When the debtor ultimately pays, the DBN loan to the SME can be repaid.

Inkumbi describes the relationship between lending and economic development as “direct and positive, except in circumstances where overextension of credit leads to inflation and that often happens only when the extension of loans does not result in increased production of goods and services. That is when there is an overextension of consumption loans relative to loans that increase business activities (business loans)”.

Obviously, money is not sufficient to empower entrepreneurs to make a success of their economic endeavours, the lending chief advises Namibians to take other avenues while cautioning against learning in a business.

“Try as best as possible to write your own business plan instead of relying only on business consultants, this process will educate you about the business sector you want to enter. I have come across many would be entrepreneurs coming to the bank and saying, ‘Give me a loan to do this or that business. There is money to be made in this line of business, I have seen who and who becoming wealthy over the past few years’.

“Often people like to imitate. Everybody wants to make and sell bricks, or sell building materials, often in the same area as the entrepreneurs he or she is copying. Innovation or trying to be different can have its own rewards, because you will have few or no competitors. My advice is therefore that entrepreneurs educate themselves and try to be innovative,” he concludes. PF