Development Bank moots venture capital fund for SME start-ups
The Development Bank of Namibia is in the process of developing and establishing a Venture Capital Fund as the third leg of the national SME Financing Strategy.
According to the bank in a statement on Tuesday, the fund will accordingly be established to invest in specific SMEs with strong growth potential, but unable to borrow and or acquire additional capital.
The fund will act as an equity investor in established SMEs by providing funding in exchange for equity with the intention that the equity funding will be applied to growth and working capital. The fund’s gain will be realised by the growth in equity value of the underlying investment instruments, in this case, the SMEs.
The fund will operate as a trust under the Trust Moneys Protection Act and is set to be registered as an independent special purpose vehicle (SPV) in terms of the Regulations of the Pension Fund Act. It will be governed by a board of trustees, a majority of whom will be independent. Trustee recruitment is planned to start soon.
It is axiomatic that the fund will have to comply with all regulatory requirements.
Development Bank Head of Marketing and Corporate Communication, Jerome Mutumba said the fund would lead to the catalytic transformation of Namibia’s SME sector, adding that greater exposure to equity funding would reverse the trend and strengthen the SME sector.
The Development Bank has previously launched the Collateral Guarantee Scheme and has pioneered the National Mentoring and Coaching Programme. The fund is the third and final leg of the SME Financing Strategy.
