Interest on Development Bank recovery loans subsidized by KfW
The Development Bank of Namibia (DBN) announced that it has secured further funding from Germany’s Kreditanstallt fuer Wiederaufbau (KfW) to subsidize DBN recovery loans for local businesses urgently in need of affordable bridging finance.
The bank pointed out that its Business Recovery Loans are unique to the Development Bank and not the same as the Bank of Namibia’s SME Economic Recovery Loan Scheme.
With KfW support, the Development Bank is now able to offer loans for terms up to 32 months at 5.925% interest. The first twelve months of the loan duration is interest-free, meaning that borrowers pay interest for only 20 months.
Previously, the Development Bank made finance available to SMEs at 15% interest, a punitive interest rate which also caused very few borrowers to actually make use of the facility. The new loans at 6% interest and 12 months exempted, make this a very affordable product
The interest subsidy does not subsidize the capital repayments, so borrowers will still be required to pay the capital over 32 months, unless a grace period is granted by DBN, depending on the merit of the project financed.
The Bank launched its Business Recovery Loans Facility in 2022 to assist eligible non-agricultural businesses to survive the impact of adverse macro-economic conditions since 2016. It succeeds the Covid-19 facility that was launched in 2021.
The recovery facility is enabled by the 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 financial challenges.
Development Bank Chief Executive, Martin Inkumbi reminded prospective borrowers that the shorter duration of these loans places the onus on borrowers to apply the financing for short term investments that will have a rapid effect on business profitability.
He pointed out that these loans are for existing, operational businesses and not for start-up enterprises.
