Lender to small business withers
Access to finance is one of the biggest impediment to the development and growth of small businesses. Creating a vehicle for such access was considered critical for the successful development and growth of SMEs. This led to the establishment of the Small Business Credit Guarantee Trust.
But it now appears, this scheme has been dormant for several years, advancing zero new loans, despite the ostentatious presence of buildings, infrastructure and paid staff.
The Small Business Credit Guarantee Trust is still active in all visible aspects except for one crucial factor. It has not advanced any credit for several years.
Established in June 1999 by the German and Namibian government, the Small Business Credit Guarantee Trust, has been set up to facilitate and assist the small entrepreneurs to have access to commercial loans from formal financial institutions, offering small and medium enterprises not only financial solutions but also mentorship and monitoring.
The purpose of the trust is to enable entrepreneurs to access loans from Participating Financial Institutions for the establishment, expansion or acquisition of a new or existing business.
The bank loan may be used to finance fixed assets and or working capital and the Trust guarantees up to a maximum of 80% of the bank loan amounting to a maximum of N$250,000.
The average term of the guarantee is 36 months, but can be extended to 60 months if required. The guarantee may not be applied to cover existing bank loans, overdrafts or any other previously arranged financial facility. The Trust can also co-guarantee the required financial facility, but to its allowable maximum amount only.
The Small Business Credit Guarantee Trust also has mentorship programmes designed to provide mentorship services to Small and Medium Enterprises or individuals wanting to start their own business or wishing to acquire an existing business, but who cannot provide the required security to access commercial bank loans. Figures last recorded by the Trust showed that it has created 2,712 jobs countrywide.
When the Economist visited the offices of the Small Business Credit Guarantee Trust last week, it was shocked to discover that although the offices still look open and running, it is actually no longer guaranteeing loans to SMEs.
One of the officials said it is now a white elephant when it comes to SME loans and this has been so for the last couple of years. In an attempt to get an interview, officials refused to divulge any information saying that it is strictly confidential.