DBN. A presentation on the DBN s MSME Support & Strategy-Emphasis on Innovation Fund Occasion:NBIC Entrepreneurs Circle

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1 DBN A presentation on the DBN s MSME Support & Strategy-Emphasis on Innovation Fund Occasion:NBIC Entrepreneurs Circle MICHAEL HUMAVINDU, Research Department 28 February 2011

2 Contents 1. Introduction to the DBN 2. MSME context underpinning DBN s approach 3. Current MSME offering 4. New MSME Credit Delivery Strategy 5. MSME Rollout Plans 6. DBN s MSME Products Rollout 2011 and beyond 7. Innovation Fund

3 Introduction to the DBN The Development Bank of Namibia provides finance for viable enterprises and sustainable initiatives that contribute measurably to the development of Namibia. The Bank provides finance for private sector start-ups and expansions, equity deals, bridging finance, enterprise development finance, trade finance, small and medium enterprises, public private partnerships, public sector infrastructure, local authorities, and bulk finance to responsible micro-finance providers. The DBN only finances Namibian participation in projects.

The Bank provides finance for private sector start-ups and expansions, equity deals, bridging finance, enterprise development finance,

4 MSME context underpinning DBN s approach Local Research on SMEs shows that: SME Financing Gap exists; Access to Finance and Cost of Finance are twin challenges; Devising interventions strategies should be grounded in the twin challenges of limited access and cost of credit; and There are also demand side, supply side and institutional bottlenecks to financing SMEs.

interventions strategies should be grounded in the twin challenges of limited access and

5 Current MSME Offering ( N$150K-N$2.5 million) Bridging Finance-Tender Based Finance SME Term Loans Microfinance Apex Facility Innovation Fund (Loans up to N$50,000 for innovative ideas) Purpose To provide finance for enterprises that create jobs. To provide funds to commercial lenders, for on-lending to enterprises to reduce the cost of loans that work towards the development of the country To promote innovative ideas at the micro & small entrepreneur level. Mentoring programmes offered through financial intermediaries and dedicated service providers like SMEs Compete and IMLT.

ideas) Purpose To provide finance for enterprises that create jobs.

6 New MSME Credit Delivery Strategy DBN to expand the direct provision of finance spectrum gradually. Smart partnership model to be pursued with Nampost to secure wide outreach. More emphasis on introducing relevant products for the MSME markets-therefore external and internal research essential. Strategy will embrace introducing new products, but also revamping, where feasible, current products that are not moving. A new department dealing with business development and support established in January This will develop a comprehensive strategy for entrepreneurial support and development.

More emphasis on introducing relevant products for the MSME markets-therefore external and internal research essential.

7 MSME Rollout Plans New Products launched in January 2011 Factoring and Invoice Discounting (as a composite) Leasing Strategy based on internal capacity of DBN lending operations as well as other resources. Gradual and selective provision of products.

Strategy based on internal capacity of DBN lending operations

8 DBN S MSME Products Roll Out 2011 and beyond A Credit Line Product for the Trading Sector-moulded along the lines of a commercial bank overdraft. Investigate Insurance Premium Finance option. Research the options and viability for a National Venture Capital Facility

bank overdraft. Investigate Insurance Premium Finance option.

9 Possible MSME Future Strategies Further national frameworks are required to deepen access of finance by MSMEs through the following strategies: Developing MSME credit rating framework/msme Credit Bureau; Invoice Clearing Bureau for the validation of accounts payable by purchasers; Development of a National Policy Based Lending Framework for MSMEs; Help further develop the expansion of the registration system for collateral to include all assets useful for MSME lending.

validation of accounts payable by purchasers; Development of a National Policy Based Lending Framework for MSMEs; Help

10 Innovation Fund-What is is What is the Innovation Fund? It s a facility that fosters implementation of concepts that will enable delivery of new products and services to the market. In its endeavour to advance entrepreneurship, the DBN identified a need to provide financial support to entrepreneurs with original business concepts and technology that may not have been fully tested and harnessed, but that have potential to deliver new or improved. Loans up to N$50,000.

11 Innovation Fund-Criteria Under the facility, the Bank considers initiatives that meet the following criteria: The invention of a new product or services; or The improvement of a new product or service; or A new process of adding value to a Namibiansourced raw material. The products, services or processes should be able to find a market or use in the local or export market.

product or service; or A new process of adding value to a Namibiansourced raw material.

12 Innovation Fund-Eligibility and Conditions Who can benefit from this fund? Locally registered businesses that meet the stated criteria. What requirements/conditions must the application meet? It has to be a locally registered business that meets the Bank s stated criteria related to Innovation. Further, the funds availed should go towards implementation of a business concept and not for research and development. The business concept should also be implemented in Namibia.

It has to be a locally registered business that meets the Bank s stated criteria related to Innovation.

13 Innovation Fund- Repayment & Terms What are the repayment terms As with all DBN facilities, the repayment terms for the Innovation Fund are determined on a case-bycase basis. However, the facility is distinct from the Bank s other products in an important way, in that clients under the Innovation Fund only repay the capital amount advanced and no interest. This is part of the endeavour to help clients get the project off the ground. Security/Collateral requirements are relaxed.

However, the facility is distinct from the Bank s other products in an important way, in that clients under the

14 Innovation Fund- Examples Ndeya Grace: DK s Silk Products: Mbeha Software Solutions: Clocknet Technology: Katutours: Ndafy Creations: peanut butter manufacturer duvets from silk worm security management system developers integrated IT offering (computer sales, training, maintenance) bicycle tours in Katutura decorative candle manufacturer

from silk worm security management system developers integrated IT offering

15 Innovation Fund- How to Apply Submit a Cover letter and Business Plan to: The Special Development Fund Development Bank of Namibia PO Box 235, Windhoek Mail or hand deliver at Reception, 12 Daniel Munamava Street, Windhoek.

Development Bank of Namibia PO Box 235, Windhoek Mail

16 DBN and NBIC What does the relationship between DBN and Namibia business innovation centre entail with relevance to the innovation fund? There is no specific relationship pertaining to the fund specifically. There is, however, a longstanding commitment to support the work of the Namibia Business Innovation Centre in line with the DBN s philosophy that innovation advances development and growth. To this effect, the DBN was the first local corporate to sponsor the Namibia Business Innovation Centre, in 2007; the Bank serves on the Centre s advisory board; and it supports the Centre s activities through its Corporate Social Investment Programme.

There is, however, a longstanding commitment to support the work of the Namibia Business Innovation Centre in line with the DBN s philosophy that innovation

17 Thank you

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