SME BANK: THE PREFERRED FINANCIAL SERVICE PROVIDER FOR MSMEs

By Penda Jonas Hashoongo
April 2016
Prime Business

With the Micro to Small and Medium Enterprises (MSMEs) being important proponents to the local economy, it has become vital for these entities to have a reliable source of financing to help them get their operations off the ground. This month, Prime Focus Editor, Penda Jonas Hashoongo, sits down with the Chairman of the SME Bank’s Board of Directors, Mr. George Simataa, to discuss the growth and objectives of the Bank as it strives to consolidate its position as the preferred finance provider for the MSME sector.

Prime Focus: You have recently taken over the reins at the Bank. What is your road map in the next few years in making the Bank relevant to the Namibian market?
    
George Simataa:
The Bank is already relevant to the Namibian market as it is for Namibians, owned by the Government of Namibia on behalf of Namibians with a mandate to support and develop the Micro to Small and Medium Enterprises (MSME) sector in Namibia. This is done through increasing value added production, services, jobs and income through the provision of affordable and accessible financial services and effective business support. We are determined to deliver on the mandate.

Our roadmap is premised on the Strategic Plan developed by my predecessors which aims at representation in all the regions of the country. This will improve accessibility and reduce the distance between the client and the Bank.

The Bank is working on strategic partnerships with key stakeholders in the areas of MSME financing and mentorship. Part of it includes, inter-operable card capability ensuring our clients can transact with their ATM cards both domestically and internationally. This will be accomplished through EMV (Euro, Master Card, VISA and Union Pay) compliance and affiliation.

My predecessors did a great job and I intend to continue to ensure that the Bank’s mandate is translated into realistic vision and mission objectives, and consequently, to implement programmes and strategies that achieve results. Our attention is focused on banking needs of MSMEs, rural communities, micro-entrepreneurs and previously disadvantaged individuals.

Prime Focus: Namibia is planning on growing the MSME scale enterprise sector to drive job creation; do you think the SME Bank is adequately financed to deal with this drive?

George Simataa
: The Bank will definitely need more resources to meet the increasing demand for credit from the MSME sector. In this regard, perhaps I should also touch on the issue of the loan book being handed over from DBN to SME Bank which will have a positive impact on the Bank’s resource base.  The magnitude of the Bank’s support is dependent upon resources that are available to the Bank. I am convinced that the Bank should be able to deal with increased demand of financing from MSMEs with more public support in terms of deposits as well as institutional investors including the Government.

The Government of Namibia, which is the majority shareholder in SME Bank has committed to invest in the Bank’s newly created Fund - “SME Revolving Fund” - a special fund that the SME Bank has created specifically to provide medium to long-term funding to MSMEs that have projects of a developmental nature that need funding. This is essentially to address the challenge MSMEs face, lack of traditional collateral to support their borrowings.  It is difficult to use ordinary depositors’ funds for such projects but with a special purpose funding vehicle such as the Revolving Fund it will be much easier for SME Bank to support MSMEs. Entrepreneurs supported through the Fund will also receive mentoring support for their businesses.

Prime Focus: The Bank’s expansion drive is to improve visibility countrywide, do you think the Bank has now managed to lay its roots and become an institution of choice to Namibians? Do you feel that the Bank’s brand has now become synonymous with the needs of Namibian MSMEs and do they look at it as a Bank of choice?

George Simataa:
For us, the issue has been of the unbanked or the under-banked Namibians. Financial inclusion has been recognised by key stakeholders in the financial services sector as a vehicle for sustainable and inclusive growth and development. Our government has undertaken a number of initiatives to accelerate financial inclusion, including the development of the Financial Sector Action Plan. Recent Finscope survey statistics show that only 62 percent of Namibians are banked. And this is quite disheartening in this day and age where technology has aided banking in a positive light. However, in adherence to the Bank of Namibia regulation, the SME Bank is playing a major role of inclusivity. Harambee! Inclusiveness in entrepreneurship and banking.
 
The SME Bank is a low cost banking institution, which means more people can access banking services.  We are proving beyond reasonable doubt that we are becoming an institution of choice.

The Bank’s Loan Book currently stands at N$370 million, projected to increase to N$500 million by the end of 2016/17 financial year, and the Board and Management is satisfied with the loan repayment.

In just over three years, the bank has over 14,000 clients who make deposits and normal transactions on a daily basis.

We have grown tremendously within a space of three years. To pass the N$370 million mark is proof that we have matured in a short period of operation. The trust and faith we have received from our clients in such a short spell has inspired us to strive to provide more solutions to entrepreneurs in our country.

SME Bank is a local bank with all its operations managed locally and that is one of the areas where we bring convenience to the clients since decisions are made within Namibia.  

The Bank has been financing businesses with viable business plans in some cases without collateral.  The viability of the project is the determining factor which makes us synonymous with the needs of Namibia’s MSME sector.

Prime Focus: What are the challenges faced by the Bank in disposing its mandate?

George Simataa:
SME Bank is a new entity in the market, and one of the major challenges is the tenure of facilities that we are providing to the clients, a majority of MSMEs out there require developmental financing, which is medium to long term funding.  That is a challenge for a new entrant.  We are engaging strategic partners with a view to raise and provide more appropriate development financing to MSMEs.

What one would also view as a challenge is dealing with negative publicity. I believe my predecessors did a lot on that but we still need to do more to make sure that the public better understands the Bank.  

The other challenge is that of infrastructure.  As I have already said, we plan to have representation in all the 14 regions of the Country and we are working on fulfilling that. Meeting high customer expectations can be challenging. This is linked to delivery channels in terms of accessibility, the pace at which we are able to grow and expand our delivery channels against the high expectations.  

The Bank is involved in stakeholder engagements where we reach out to talk to the public in areas where the Bank is not represented. There is enormous public outcry and there is so much that is expected of the Bank. We need to continue mobilising the resources to meet these high expectations in a sustainable manner.

Prime Focus: The challenge of being an MSME financing institution is the challenge of having loan seekers presenting weak business plans, is it in the Bank’s future plans to start introducing mentorship programmes for future beneficiaries?

George Simataa:
In order to address critical issues facing MSMEs, the Bank has special programmes to suit MSMEs needs and work closely with clients to ensure that they receive end-to-end advice. The Bank helps grow start-ups or micro businesses, and provide them with financing and or business development advice with the aim to promote entrepreneurship across priority and growth sectors.

We educate the borrowers on how to manage their businesses and monitor them to ensure that they are delivering on what they would have promised when they borrow from the Bank. The Bank is working on a mentorship program that entails strategic partnerships with key industry players or networks with experienced business persons.

Prime Focus: What should the Bank do to be more attractive and stifle competition from competition (other Commercial Banks)?

George Simataa
: One area in which the Bank has a competitive advantage is where we bring convenience to the clients by being a local Bank.  We don’t need to consult or go outside the boundaries of Namibia in making decisions as what happens with other banks.  As far as customers are concerned, the turnaround time for decision-making is relatively short ensuring customer satisfaction.  Lastly we are open to the public for longer hours.

Prime Focus: Since inception how many clients has the Bank gathered to date?

George Simataa:
As we talk of inclusivity, it does not become a numbers fact anymore. It becomes ‘all’. However, since inception, the Bank’s clientele is now over 14,000 businesses and individuals who make deposits and normal transactions on a daily basis.  Inclusivity for us is when the Bank customers are from all sectors of the economy, Construction, Property development, Transport, Hospitality, Tourism, Manufacturing and Renewable energy.

Prime Focus: Interest rates are always a restrictive measure to MSMEs sourcing financing, what are the rates of the Bank and what is being done to make sure that they are attractive?

George Simataa
: The Bank offers competitive interest rates and interest rates are dependent on the type of financing required always taking into account the MSMSEs’ ability to repay. What is more important is to realise that the major problem to MSMEs is access to sources of funding irrespective of the cost. This has been the case all over the world and the strategy therefore is deal with the supply side so that pricing becomes a competition issue.

Prime Focus: As part of the decentralisation of the Bank’s operations, how far across the country has it extended and what is the long term plan in terms of decentralisation?

George Simataa:
SME Bank has been expanding its infrastructure by opening new branches in the Oshana region (Ongwediva) and Kavango East Region (Rundu).  This is in addition to the two existing branches in Windhoek.  The Bank is working on plans to open branches in all the other regions of the country with the next branch planned for Walvis Bay in the first quarter of the Banks new financial year.. Apart from branches SME Bank has nine conveniently located ATMs, two at the Main Branch, two at Katutura Branch, one at Maerua Mall, one at Kwasa Kwasa Centre – Eveline Street, the latest additions being in Kleine Kuppe at the Mega Centre (behind the Grove Mall) two at our new Branch in Ongwediva and Rundu respectively.

Our vision is to have representation in all 14 regions of the country and that is where we are heading to. To date, the Bank has four branches and expects to have representation in each of the fourteen (14) regions by the end of 2017.

Prime Focus: Can you distinguish between the role of SME Bank and Development Bank of Namibia (DBN) in terms of providing funding the SME sector?

George Simataa
: Cabinet passed a resolution that charged SME Bank with the responsibility of supporting the MSME sector while DBN is supposed to focus on infrastructure and large businesses. The MSME sector is defined as enterprises or projects within an annual turnover of up to N$10 million, effective 1 November 2015.  This falls outside the scope of the DBN threshold.

Besides the figures mentioned, SME Bank provides special attention to projects of Micro to Small and Medium Size Enterprises (MSMEs), and those catering to Rural Communities, Micro Enterprises and Previously Disadvantaged Individuals (PDIs).  

We have a full Commercial Banking License and also offer banking services to individuals and companies that are not necessarily MSME’s, through Personal Banking (Retail), Corporate Banking, Treasury and Investment Management. We are also bringing entrepreneurship banking closer to the people.

Prime Focus: With the country’s industrialisation seemingly in the hands of the entrepreneurs operating in the MSME sector, what has the Bank done to enhance financial literacy to the point that these entrepreneurs are suitably positioned to capitalise on the services it offers?

George Simataa:
With the branch rollout for the regions, one of the challenges that we have observed and expected is the literacy problem.  The Bank proactively recruited staff from all the regions of the country and has produced leaflets printed in indigenous languages. The Bank is also involved in stakeholder engagement sessions such as NCCI meetings, SME hubs, women gatherings, etc.

Prime Focus: Could you outline the growth of the institution since it opened its doors a few years ago with particular reference to the challenges that the institution has had to overcome between then and now?

George Simataa:
One of the Bank’s major highlights is the ability of the team to set up the institution from scratch and put in place the Bank’s infrastructure.  The Bank was able to rollout branches, set up ATMs for the customers to be able to access their funds, products that are customer focused and come up with convenient banking hours.

The Bank also introduced the zero cash deposit fee service to bring convenience to the clients.  The Bank managed to come up with strategic partnerships; one such partnership is between the Bank and the Environment Investment Fund (EIF), which promotes the use of renewable energy at a subsidised rate. The initial funds budgeted for that partnership were exhausted before the end of the year it was allocated for and the Bank had to request for additional funds to take care of the high demand.  Towards the end of 2015, the Bank signed an MOU with AgriBank to offer financial assistance to MSMEs in Agribusiness.  

The Bank is working to get onto the EVM (Euro, Master Card, VISA and Union Pay) Platforms, to enable our clients to use their cards both nationally and internationally.

Products development and enhancement is another key area that we work on daily. Namibia has three major payment streams which are Electronic Funds Transfer Stream, Cheque Payment Stream and the Card Payment Stream.  In this short time, we have managed to integrate in the first two and the Card Payment Stream is receiving our attention.

The Bank continues to see an increase in the number of customers that are opening accounts with the Bank and applying for funding.

We continue to sensitise the public that SME Bank is a Commercial Bank which provides banking services to depositors, investors and borrowers.

SME Bank will continue with its Branch expansion plan of having a presence in all 14 regions of the country. Besides being the first to offer clients zero cash deposit fee on all cash deposits, we have amongst other new products, flexible collateral requirements.  

The Bank has convenient longer banking hours (08:00 to 17:30 weekly and 08:00 – 14:00 Saturday).

The introduction of the E-Alerts functionality coupled with the issuing of ATM Cards, Cellphone Banking and Internet Banking Facilities offers convenience for our valued clients.

A new addition on our Value Added Services menu is the purchasing of airtime and electricity and other bill payments such as telecoms tariffs as well as utility companies. This suite of value added services will offer a seamless banking experience to customers providing self-service options that are available with ready-to-perform transactions. Non-customers can walk into our Bank and buy electricity at any one of our friendly tellers.

Prime Focus: What plans does the Bank have to improve its Corporate Social Responsibility?

George Simataa:
Corporate Social Responsibility has cost implications and SME Bank being in its infancy stage, it has incorporated CSR in its medium to long-term plans. The Bank has as part of its sustainable strategy mobilisation of appropriate resources to be able to meet the needs of its stakeholders which include the communities it operates in.