• Summary
  

Summary

Financial Services for Small Enterprises in Namibia is a study report published by the Joint Consultative Committee (JCC) with the support of the Friedrich Ebert Stiftung (FES). The study was carried out and the report written by Claudio Tonin, Paolo Dieci, Alessandro Ricoveri and Serena Foresi of Comitato Internazionale per lo Sviluppo dei Popoli (CISP), an Italian NGO, in collaboration with Dr Dirk Hansohm of the Namibian Economic Policy Research Unit (NEPRU).

The present study was primarily conceived as an update of research on financial services rendered to small businesses in Namibia. A first report dealing with this subject was published by the Friedrich Ebert Stiftung in October 1996 under the title Credit Delivery Systems for Small Enterprises in Namibia. The goal of the first study was to analyse the available credit and saving facilities for small and micro enterprises (SMEs) in Namibia, and to discuss how they could be improved.

The primary aims of the present study are as follows:

• To analyse the service providers, the different forms of financial support given to SMEs, the areas served by the programmes offered, the linkages and collaborations existing between service providers and their programmes, and the sustainability of the credit schemes implemented.
• To compare the situation in 1996 with the current situation.

SME service providers comprise the target group of this study. In the Namibian context, these service providers are basically NGOs and parastatals. An analysis was made of the credit systems set up by these organisations and institutions. The information gathered pertains to outreach, performance rate, interest rates applied, repayment period and accessibility. Information regarding the commitment and participation of formal credit and savings institutions in the development of the SME sector was also collected.

This study makes the following main assumptions:

• The growth of the SME sector could have a very positive impact in terms of employment and socio-economic development.
• This growth is currently hampered by a number of factors, including the lack of formal collateralised credit for micro and small enterprises.
• Consequently there is a need for micro credit schemes that specifically cater to the SME sector.
• The success of any micro credit programme depends upon its financial sustainability and its impact in terms of entrepreneurship development.

This report stresses that despite the many differences existing between current credit providers in respect of the financial and methodological criteria they employ, all follow an "interventionist" approach, whereby a number of services, such as training, enterprise follow-up, evaluation and skills upgrading are added to credit delivery. This can be counterposed to a "minimalist" approach, which tends to concentrate exclusively on credit in order to cut down operational costs and ensure sustainability.

The authors recommend that efforts be made to simultaneously attain the following objectives:>

• To make credit delivery sustainable.
• To reach micro businesses.
• To provide micro entrepreneurs with the necessary technical and managerial support.

One possibility in this direction could be to strengthen the collaboration between small credit providers, such as NGOs, parastatals, and formal credit institutions. The idea is that NGOs and parastatals should concentrate on a number of activities (training, follow-up, monitoring and evaluation, savings mobilisation, etc.), which is necessary to ensure the greater impact of credit, while the financial aspects of credit delivery are managed by the formal credit institutions. At the same time, NGOs funded by time grants should work closely with public or existing private institutions, so that these institutions can take over the relevant projects once the grants have terminated. Alternatively, specialised micro financial institutions could be established once a feasibility study has been conducted in terms of a minimalist approach.

Another suggestion formulated in this report pertains to the need to strengthen a participatory approach, where borrowers/clients are involved directly in designing the credit scheme, as well as in the loan disbursement decision-making process. The study also identifies a need to undertake a survey on informal traditional credit and saving behaviour in Namibia. Such a survey could make ongoing projects more culturally driven.

Regarding the 1996 and 1998 situations of credit providers in Namibia, the study draws a comparison on the basis of four sets of indicators, as follows:

• General indicators (total size of fund, number of loans disbursed, provision of training).
• Strategic indicators (access to credit by gender, access to startup/ongoing credit, access to credit in urban/rural areas).
• Effectiveness indicators (total disbursed capital, average loan size, default).
• Efficiency indicators (processing capacity, number of staff involved in loan processing and disbursement, time for disbursement).

Generally, the results of this comparative exercise indicate that there has been an increase in the amount of both available and disbursed funds, as well as in the number of delivered loans. At the same time, data from the two periods indicate improvements in the strategies followed by credit providers. In fact, more emphasis is currently given to gender equality, with women’s participation in the schemes constituting around 60% of the capital disbursed as loans as compared to 40% in 1996. Another positive strategic development is the growing number of loans disbursed to small businesses in rural areas.