SECTION 3:
Profiles of institutions and Organisations Surveyed in the Study


• 3.1 NON-GOVERNMENTAL ORGANISATIONS (NGOS)
  • 3.1.1 Co-operation for Development (CD)
  • 3.1.2 Community Small Enterprise Development Agency (COSEDA)
  • 3.1.3 Directorate Adult Basic Education of the Ministry of Basic Education and Culture (DABE) / Comitato Internazionale per lo Sviluppo dei Popoli (CISP) / Adult Skills Development for Self-Employment (ASDSE)
  • 3.1.4 Institute for Management and Leadership Training (IMLT)
  • 3.1.5 Lihepurura Kavango Trust
  • 3.1.6 Lisikamena
  • 3.1.7 Okutumbatumba Hawkers’ Association (OHA)
    
• 3.2 PARASTATALS
  • 3.2.1 Development Fund of Namibia (DFN)
  • 3.2.2 Namibia Development Corporation (NDC)
• 3.3 FORMAL CREDIT AND SAVING INSTITUTIONS
  • 3.3.1 Commercial Bank of Namibia (CBN)
  • 3.3.2 Bank Windhoek
  • 3.3.3 First National Bank (FNB)
  • 3.3.4 The City Savings and Investment Bank (CSIB)
  • 3.3.5 Standard Bank of Namibia (SBN)
  • 3.3.6 NamPost Savings Bank

SECTION 3:
Profiles of institutions and Organisations Surveyed in the Study

This section of the booklet presents the profiles of the entities interviewed for the study, which were selected according to the criteria summarised in the introductory section. The interviewees include NGOs, parastatals and formal credit and savings institutions.

3.1 NON-GOVERNMENTAL ORGANISATIONS (NGOs)

3.1.1 Co-operation for Development (CD)

After years of operation in Namibia, CD (a London-based NGO) launched a new credit scheme in 1996 called Limbandungila, which is based in the Oshana Region in northern Namibia. The total capital outlay of N$750 000 originated from the British Department for International Development (DFID) and Comic Relief. The scheme is designed to sustain female entrepreneurs operating especially in the informal market of the town of Oshakati. The programme has been implemented in partnership with the Commercial Bank of Namibia. The agreement signed with the Commercial Bank foresees the following: the fund will cover 100% of default; CD will be allowed to lend up to 60% of the fund value; the bank will disburse the loans in advance; repayment will usually be collected by CD’s credit programme officers; interest on loans will go to the bank; administration costs will be paid by the entrepreneurs to the bank. The available guarantee fund amounts to N$361 000, of which 56% or N$202 300 had been disbursed by November 1997.

The scheme is structured to encompass three loan stages:

• The first loan is made available to a group of three or four women, each of whom receives an amount of N$800, which should be repaid within four months. In case of default the amount due is recovered from the other group members.
• The second loan of N$1 500 is disbursed on an individual basis and should be repaid within six months.
• A third loan of N$2 500 can be disbursed to individuals who have repaid the previous loans, and should be repaid within eight months.

The scheme structure foresees a limit of N$7 000. For all three types of loan, the interest rate is 25%, no grace period is given and a savings amounting to 20% of the loan requested should be deposited into a savings account as collateral. The loans are disbursed in cash through the Commercial Bank of Namibia. By the end of 1997 a total of 189 loans of all three types had been disbursed.

Applicants for a CD loan must satisfy the following criteria:

• They must be women, as the CD credit scheme serves female entrepreneurs exclusively.
• They must prepare a business plan, which they do in collaboration with CD personnel through a brief training session on loan management.
• They should apply in groups of three or four members for the first loan (the second and third loans being disbursed on an individual basis).
• They should save and deposit into a savings account 20% of the loan amount as collateral.

The credit scheme does not target a specific sector, but alcohol-related businesses are excluded from the scheme.

In the past, a Loan Committee composed of 10 members, which had to meet on a monthly basis, decided on the applications. CD took over the function of assessing, screening and approving the applications in 1997. The processing of applications can take up to two months, during which period CD is capable of disbursing approximately 25 loans. Following the disbursement of loans, borrowers are visited on a weekly basis by the credit programme officer. Three people are currently involved in managing the fund: a chief executive officer, a finance officer and the credit programme officer.

Measures undertaken in case of default include collateral repossession and legal action to repossess assets if necessary. The target default ratio ranges from 5% to 10% per annum. In November 1997, due to a very high default rate of 43%, the Commercial Bank and CD agreed to put on hold the disbursement of loans to enable CD to focus exclusively on the repayment of loans. The default rate has decreased to 19% as a result.

To achieve sustainability CD plans to adopt the following measures in the near future:

• Charging a commission for each loan disbursed.
• Charging an administration fee of N$10 for each loan application. [ This measure has already been taken.]
• Re-negotiating with the Commercial Bank of Namibia to collect interest on loans.
  
  

TABLE 3:
SUMMARY OF KEY DATA FOR CD LOANS

Area of operations (split urban/rural)	Oshakati (100% urban)
Size of loan fund (state if split) in N$	N$361 000
Origin of funds	DFID Comic Relief
Duration of funding	DFID 1995-1998 Comic Relief 1996-1998
Nature of control/co-ordination with donors	N.A.
% of fund disbursed as loans	56%
No. of loans disbursed (gender breakdown)	189 loans (100% women)
Average size of loans	N$1 070
Upper limit (size)	N$7 000
Lower limit (size)	N$800
Average term	6 months
Upper limit (term)	8 months
Lower limit (term)	4 months
Processing time for loan (from submission to disbursement)	2 months
Processing capacity (no. of loans)	25 every 2 months
Target industries/activities Any industries/activities excluded? If yes, which?	Retailing (100%) Yes Alcohol-related businesses
Collateral requirements	20% savings of loan amount deposited
Training requirements	Loan management (one day)
Links to training institutions	None
Interest charged	25% fixed
Provision of interest rate to cover operational costs, default, inflation	N.A.
Target default ratio	5% to 10% per year
Actual default ratio (to date)	19%
Monitoring of borrowers	Weekly visit to borrowers by credit programme officer

3.1.2 Community Small Enterprise Development Agency (COSEDA)

COSEDA is an NGO that provides credit to micro and small businesses operating in Windhoek and Katutura which may not be able to access credit in the formal banking sector. This organisation was established in 1991 as the National Job Creation Service (NJCS), and its name change to COSEDA was instituted in 1995 at the outset of its current development phase. COSEDA provides credit through the Savings and Credit Scheme known as Ngaturitunge Pamwe, a name deriving from two indigenous languages – Otjiherero and Oshiwambo – which means "Let’s Develop Ourselves Together". Ngaturitunge Pamwe draws its inspiration from traditional community practices which focus on self-help and on mutual support and sharing in local communities. During the period leading to May 1997 the focus of COSEDA operations was on preparing the groundwork for the launch of the Ngaturitunge Savings and Credit Programme. In developing its policy, COSEDA has drawn its inspiration from institutions like Grameen Bank and the Kenya Rural Enterprise Programme (K-Rep). COSEDA aimed at developing a model that would have a similar impact in Namibia, adapting the key principles and methodology of the institutions cited to the Namibian context. Technical assistance was provided by K-Rep through a three-month consultancy beginning in June 1997. By following this process of policies and systems refinement, COSEDA was able to set up its new programme and start disbursing loans by October 1997.

The capital allocation for the Ngaturitunge Pamwe Credit and Savings Scheme, which in 1998 is N$450 000, is provided by several donors agencies: Oxfam (USA), Catholic Relief Services (CRS), Humanistic Institute Voor Ontwikkelung Stigtung (HIVOS), Care Austria, and the READ Project of the United States Agency for International Development (USAID). The donors assert control over the fund by means of accountability auditing, in ways that vary for each donor. This control in no way influences the programme policy.

Thus far 26,6% of the fund has been disbursed to finance 122 loans, 87% of which went to female entrepreneurs. During the first year of scheme membership the upper loan limit is N$1 500, repayable within six months. In the second year of membership the upper limit is N$2 500, repayable within nine months. In the third year of membership loans amounting to a maximum of N$4 500 can be disbursed and repaid within 18 months. No grace period is envisaged in the programme. Interest rate is presently at prime, and is intended to cover 10% of inflation, 5% of default and 4% of operational costs.

The following sectors are supported by this scheme:

• Trade/Retail (88%)
• Service (7%)
• Manufacturing (5%)

The programme does not provide loans to taxi businesses due to high-risk factors such as a high accident rate involving taxis and the high number of unlicensed taxi drivers, and also due to the large loan amounts requested by entrepreneurs in this sector.

Ngaturitungwe Pamwe has adopted a group-based methodology of lending to entrepreneurs. Before potential clients are accepted, an assessment is carried out by COSEDA credit officers to determine whether they meet the eligibility criteria used to screen applicants, which include the following:

• Enterprises should have a maximum of 10 employees.
• The enterprise’s assets should not exceed N$10 000.
• Enterprises should be located within the programme’s operational area, i.e. Windhoek or Katutura.
• Entrepreneurs should be resident Namibians aged 18-75 years.
• Applicants should be willing to participate in the group-based scheme.

Entrepreneurs who meet the above criteria and wish to apply for loans are assisted to form self-selected groups of six potential borrowers. In the Ngaturitunge Pamwe scheme the group of six is known as mabasen, meaning "self-reliance". Two to four mabasens are needed to form an association known as an oruuano. Savings mobilisation and lending does not begin until the oruuano is formed. The oruuanos are also self-selecting and constitute the administrative units for COSEDA lending operations.

Upon the oruuano’s formation COSEDA Credit Officers facilitate the orientation of members around the scheme’s policies and procedures to ensure that each member comprehends these. This orientation process involves discussing every credit and group policy and explaining to members how each policy affects them. Procedures regarding savings, loan applications, disbursements, repayments, arrears, defaults and subsequent loans are explained in detail. Training used to be provided by the Private Sector Foundation (PSF) in Windhoek.

Members of each oruuano meet with a Ngaturitunge Pamwe Credit Officer on a weekly basis. Members make a weekly contribution of N$5 into their group savings account (COSEDA has signed an agreement with Standard Bank to open the group saving accounts), and they continue to make these contributions for as long as they remain members of the scheme. Members familiarise themselves with other oruuano members and their businesses and elect association officials. Much of the decision-making and administrative processes is carried out by borrowers through their oruuanos.

After eight weeks of consecutive and uninterrupted saving by every oruuano member, two members from each mabasen become eligible for a loan. Loans are disbursed by cheque in group meetings. The group is responsible for appraising the loan, with guidance from the Ngaturitunge Pamwe credit officer. Loans are repaid with interest in weekly installments and all members continue to save. Four weeks later the next group qualifies for loans, provided that the first group has made regular weekly repayments.

If a borrower defaults, his/her savings are forfeited and the balance is recovered from the savings of other mabasen and oruuano members. Such group pressure is considered to be a good incentive to ensure that loans are repaid. When the first lending cycle is complete, oruuano members can apply for a second loan, as long as they maintain the savings and repayment installments as scheduled. A 10% saving is required for subsequent loans to be granted. Credit officers attend weekly oruuano meetings and monitor loan repayments, savings mobilisation and banking procedures. The repayment rate is currently 100%.

Nine people are involved in managing the Ngaturitunge Pamwe Savings and Credit Scheme Fund: four credit officers, one accountant, one administrator, one administrative assistant, one office assistant and the director.

COSEDA aims to reach sustainability by charging positive market-related interest rates (and the introduction of a cost-based interest rate in 1999 is planned), keeping operational costs down, servicing a larger number of loans (the intention being to replicate the scheme in northern Namibia once performance and design standards are fully tested) and maintaining a high repayment rate.

TABLE 4:
SUMMARY OF KEY DATA FOR COSEDA LOANS

Area of operation (split urban/rural)	Windhoek and Katutura (100% urban)
Size of loan fund in N$	N$450 000
Origin of funds	Oxfam (USA), CRS, HIVOS, Care Austria READ Project of USAID
Duration of funding	From 1-2 years renewable
Nature of control/ co-ordination with donors	Accountability auditing
% of fund disbursed as loans	26,6%
No. of loans disbursed (gender breakdown)	122 loans (87% F, 13% M)
Average size of loan	N$1 000 in year 1
Upper limit (size)	N$1 500 in year 1 N$2 500 in year 2 N$4 500 in year 3
Lower limit (size)	N$200 in year 1
Average repayment term	6 months in year 1 9 months in year 2 18 months in year 3
Upper limit (term)	6 months in year 1 9 months in year 2 18 months in year 3
Lower limit (term)	3 months
Processing time for loan (from submission to disbursement)	8 weeks (for the first loan)
Processing capacity (no. of loans)	24 loans per month
Target industries/activities Any industries/activities excluded? If yes, which?	Trade/Retailing 88% Service 7% Manufacturing 5% Yes Taxi businesses
Collateral requirements	10% and continuous saving for second loan
Training requirements	8 weeks
Links for training	PSF (up until early 1998)
Interest charged	Prime
Provision of interest rate to cover operational costs, default, inflation	10% inflation 5% default 4% operational costs
Target default ratio	5%
Actual default ratio (to date)	No default
Monitoring of borrowers	Loans are repaid weekly and credit officers attend weekly meetings, during which loans are repaid and savings mobilised.

3.1.3 Directorate Adult Basic Education of the Ministry of Basic Education and Culture (DABE) / Comitato Internazionale per lo Sviluppo dei Popoli (CISP) / Adult Skills Development for Self-Employment (ASDSE)

Seeking to satisfy educational needs expressed by learners in the National Literacy Programme (NLP) of the Ministry of Basic Education and Culture (MBEC), the ministry, through its Directorate Adult Basic Education (DABE), established contact in December 1994 with Comitato Internazionale per lo Sviluppo dei Popoli (CISP), an Italian NGO that implements small- and micro-enterprise development projects in Namibia.

A proposal to set up the Adult Skills Development for Self-Employment (ASDSE) project was approved and funded by the European Commission under budget line B7-5071: Assistance to Rehabilitation Programmes in Southern Africa.

The ASDSE was launched in February 1996, to run for a period of 36 months, piloted by a team of two experts from Italy as well as local experts and consultants in the fields of training and credit provision. The project covers the whole country excluding the Kunene Region and parts of the Erongo Region.

The project has been designed as a link between Namibia’s education system and efforts to create a favourable environment for job creation and self-employment in the country.

The main goal of the project has been to train NLP District Literacy Officers (DLOs) in their respective regions, to equip them for tasks that they will be required to perform in the MBEC’s regional offices as part of the ASDSE project. These tasks include the following:

• Selecting the businesses or entrepreneurs in their communities who may qualify for ASDSE support.
• Completing the Business Plan Questionnaire and loan request forms.
• Providing the follow-up of the credit scheme.
• Providing the follow-up and entrepreneurial training for candidates;
• Managing the follow-up and training of NLP literacy promoters who work in their communities at the grassroots level, with the aim of creating a "literacy network" to share existing resources.

The availability of the DLOs to perform these tasks has the following advantages:

• By and large they are familiar with the people they are dealing with, which helps to minimise the risk of bad loans (defaults).
• Using the DLOs means utilising available and trained human resources, whose training costs and remuneration are paid by government, for a project administered by government. The project itself only had to provide training for the DLOs in the area of basic business management.
• The majority of the DLOs are using the project to attract more learners to the literacy programme, and it is used as an additional community facility.

So, all the logistical and operational costs of the ASDSE, such as the costs of follow-up and monitoring, are already covered by the MBEC as running costs of the NLP.

ASDSE loan disbursement is based on criteria for selection defined at the outset of the project, the most relevant of which are: to give preference to individual rather than group entrepreneurs; to allocate no more than 30% of the project fund to new ventures and at least 60% to female entrepreneurs; to evaluate the viability of the project and managerial skills of the entrepreneur. Training is not usually seen as a precondition but is available.

Terms and conditions of the scheme foresee a minimum of N$500 and a maximum of N$5 000 for micro loans, and a minimum of N$10 000 and maximum of N$20 000 for the special window created to support expansion in the activities of previously successful entrepreneurs. Interest rate is prime plus 2%, and an amount equivalent to 10% of the loan requested is required, intended either to serve as collateral or as a display of the entrepreneur’s commitment. The repayment period ranges from six to 18 months.

Selecting the bank with which to establish the credit guarantee scheme has been another important factor. The signing of the agreement between the ASDSE project, First National Bank (FNB) and the MBEC is considered to be an achievement of the project chiefly because this means it has been implemented in partnership with a commercial bank. In fact, the FNB’s participation entails covering 20% of the loans defaulted and not charging any management and administrative fees for the guaranteed funds, leaving to the project the responsibility for the final decision in approving loans.

The joint management of the ASDSE Credit Guarantee Scheme proposed a clear division of tasks between the FNB and ASDSE. As a result, the tasks of ASDSE include: identifying borrowers, appraising loan applications, providing business training, monitoring and following up of businesses and developing a database. FNB’s main duties include: disbursing and collecting the loans, opening business accounts, developing a loan reports system and providing details on banking rules. So far the loan repayment rate stands at 98%.

The total number of loans disbursed by the end of July 1998 was 118, for a total amount of N$275 294. of which 66,94% was disbursed to female entrepreneurs. Of the total credit fund amount disbursed, 60% is directed to rural areas, and the sectoral breakdown is as follows: manufacturing 6%, services 55%, retail 17% and craft 22%.

In cases of default tracking agencies are hired and legal action is taken directly by the bank.

TABLE 5:
SUMMARY OF KEY DATA FOR DABE/CISP/ASDSE LOANS

Area of operation	Nationwide (rural 60%, urban 40%)
Size of loan fund	N$500000
Origin of funds	European Commission
Duration of funding	3 years from February 1996
Nature of control/co-ordination with donors	Quarterly financial and technical reports and frequent discussion with donor representatives in the country
% of fund disbursed as loans	55%
No. of loans disbursed	118 (66,94% to women)
Average size of loans	N$2 333
Upper limit	Micro loan N$5 000; second-tier loan N$20 000
Lower limit	Micro loan N$500; second-tier loan N$10 000
Average term	12 months
Upper limit (term)	18 months
Lower limit (term)	6 months
Processing time for loan (from submission to disbursement)	1,5 months
Processing capacity (no. of loans)	7 loans per month
Target industries/activities Any industries/activities excluded? If yes, which?	Manufacturing 6% Services 55% Retail 17% Craft 22% Yes Alcohol-related businesses
Collateral requirements	10% savings of loan amount deposited
Training requirements	Entrepreneurial Management (3 days) if needed
Links for training	None (project provides training)
Interest charged	Prime + 2%
Provision of interest rate to cover operational costs, default, inflation	Inflation 15% Default 5% Operational costs 6%
Target default ratio	Lower than 4%
Actual default ratio (to date)	2%
Monitoring of borrowers	Once a month at their work sites

3.1.4 Institute for Management and Leadership Training (IMLT)

The IMLT was established in 1983 as a training institution directed mainly to the commercial, industrial and agricultural sectors. IMLT courses were made available to the public at large, and focused on disadvantaged groups in the aforementioned sectors. The IMLT’s main donor is the German Hanns Seidel Foundation, which provides a fund that covers operational expenses for implementing the training and credit programmes aimed at the SME sector.

In its mission statement the IMLT "endeavors to facilitate the development of a Namibian Small Enterprise sector, by offering entrepreneurs an opportunity to expand their productive and/or wealth-generating capabilities". This is done by providing a set of services, as follows:

• Specific training courses in business management, namely the "Start Your Business" and "Improve Your Business" courses.
• The Revolving Credit Fund.
• The IMLT/FNB Credit Guarantee Fund.

The Revolving Credit Fund (RCF) was initiated in 1994 as a pilot scheme to supply loans to small enterprises in Namibia. The loan fund originated from the Deutsche Gesellschaft fuer Technische Zusammenarbeit (GTZ), which provided N$970 000, and from the Ministry of Trade and Industry (MTI) which provided N$130 000. In addition the IMLT received N$192 000 from the GTZ in 1997, to cover the scheme’s operational expenses.

The criteria set for the RCF pertain to the viability of the business, the presentation of a business plan and attendance of a training course in business management if needed. A trainer/consulting officer undertakes the necessary visits to the business to assess its viability and follows up on each application. The application is then submitted to the Management Committee, composed of all the IMLT staff, which then takes the final decision. All committee members must approve the application and the officer who submitted it then becomes 100% responsible for the follow-up activities and loan repayments. The IMLT has adopted an approach whereby the performance of the trainers/consultants is measured according to the performance of their individual loan portfolios. This might translate into a remuneration benefit. Approved loans are disbursed by way of a cheque made out to the supplier for the purchase of assets. Only in limited cases will loans go to cover working capital (in an amount not exceeding 10% of the loan requested). A collateral system is applied for most loans, based on a clause in the hire purchase style included in the contract signed between the IMLT and the entrepreneur.

Businesses are visited at least once every three months and an assessment is made in terms of improvement and needs. In case of default the IMLT proceeds legally against the business to repossess the assets purchased with the loan.

The IMLT management stresses that the institute would like to gradually move away from credit supply to SMEs to focus mainly on the training component and capacity-building. The idea would be to identify an organisation that would be willing to take over the outstanding RCF loan portfolio.

The IMLT/FNB Credit Guarantee Scheme was implemented in 1997. The FNB donated a fund of N$250 000 to the IMLT to deliver loans to the SME sector. The IMLT recommends and selects the businesses that receive the loans. Applications are approved by a committee composed of the IMLT general manager and one trainer/consultant, and a credit manager and the International Operations manager of the FNB. The fund gives a 100% guarantee on the loans disbursed. Four loans have been disbursed to date, totaling N$150 000. Interest on loans is prime plus 2%.

TABLE 6:
SUMMARY OF KEY DATA FOR IMLT/RCF LOANS

Area of operation (split urban/rural)	Nationwide (rural 35%; urban 65%)
Size of loan fund (split) in N$	N$2 300 000 (original N$1 100 000)
Origin of fund	GTZ and Government of Namibia (Ministry of Trade and Industry)
Duration of funding	1994-1997
Nature of control/ co-ordination with donor	Reports to be given to MTI on yearly basis
% of fund disbursed as loans	96,4%
No. Of loans disbursed (gender breakdown)	106 loans (49% F; 51% M)
Average size of loan	N$20 915
Upper limit (size)	N$50 000
Lower limit (size)	N$5 000
Average term	2 years
Upper limit (term)	5 years
Lower limit (term)	1 year
Processing time for loan (from submission to disbursement)	4 weeks
Processing capacity (no. of loans)	5 loans per month
Target industries/activities Any industries/ activities excluded? If yes, which?	Service 50% Manufacturing 36,7% Trade 13,3 Yes Alcohol-related and taxi businesses
Collateral requirements	Hire-purchase arrangements
Training requirements	Yes if needed
Links to training institutions	Training is provided by the IMLT
Interest charged	Prime minus 2% for 1st year Prime minus 1% for 2nd year Prime for the following years
Provision of interest rate to cover operational costs, default, inflation	Inflation 15% Default 4-6% Operational costs 0%
Target default ratio	10%
Actual default ratio (to date)	13%
Monitoring of borrowers	Loan holders are visited every quarter and an assessment is made in terms of improvement and needs

3.1.5 Lihepurura Kavango Trust
[ The data available on the Lihepurura Kavango Trust loan scheme is not comprehensive as the scheme has not yet begun to disburse loans, but the information given here is derived from the organisation’s plan of action.]

The Lihepurura Kavango Trust is an NGO that emerged from the Canada Namibia Cooperation (Canamco) programme. Canamco was a five-year programme (ending 31 March 1997) implemented by Oxfam Canada. The programme aimed to improve the quality of life of the rural poor of the Kavango Region of northern Namibia, by providing the necessary assistance to increase agricultural production and build cottage industries and co-operatives in the region, this assistance addressing the acute needs of the region for credit, literacy training, water development and primary health-care services.

Lihepurura Kavango Trust operations are based in Rundu in northern Namibia and are led from the Rundu office. Lihepurura is still in its transitional phase of separation from the Canamco programme. The trust intends to continue with what Canamco started, on the basis of the experience gained during the course of the programme, and focusing on programmes which will lead the rural communities of the Kavango Region to achieve the objectives of economic development. To this end Lihepurura is implementing a small-enterprise programme aimed at achieving higher levels of income through creating employment that will lead to self-reliance for the communities of the region. A loan scheme is envisaged for the programme that is intended to encourage more effective savings to enable community members to gain access to existing sources of credit which would otherwise be denied. The entire loan scheme fund of N$500 000 was provided by Canamco/Oxfam Canada as a grant. Lihepurura is bound to an external mid-term review (with Canamco auditors) to evaluate the management of the funds received.

The Lihepurura Kavango Trust had not disbursed any loans at the time of writing as it is still in the process of evaluating the loan applications, but the trust has inherited 24 outstanding loans (totaling N$350 000) from the previous Canamco loan scheme. The loans mainly target the agricultural sector (farming/gardening associations) and community bakeries, and are all disbursed to groups. The loans should be repaid by the end of 1998 at a 5% interest rate. So far Lihepurura has not experienced any default on these loans.

The new scheme will provide funds to be disbursed as loans ranging from N$1 000 to N$20 000. The beneficiaries of the scheme could be any small- or medium-scale entrepreneurs, subsistence agricultural farmers and other individuals or groups of individuals found to meet the requirements of the scheme. Borrowers should be residents of the Kavango Region and preference is given to those who have already started to operate viable income-generating activities – these being mainly in the agricultural sector (70%) and processing manufacture sector (30%) – and who want to improve production. Cuca shops are excluded as businesses that qualify for loans. Loans should be repaid within five years at maximum and an interest rate of 21,5% will be charged for all types of loans. Lihepurura will also provide materials and equipment purchased for income-generating projects on a loan basis. Repayment will begin three months after the equipment or materials are received. In the case of loans disbursed in cash (working capital), an up-front amount of 10% should be deposited in a savings account before the loan can be released. People can withdraw and save in the account, but they cannot withdraw the 10%, and the next loan will be determined by the amount of savings and the repayment period. Borrowers should undergo a training course provided by Lihepurura’s Department for Small Business Enterprises. The trust is also finalising an agreement with the Pahuka Training Programme which will assist the organisation in providing the training needed by the entrepreneurs.

Nine members of the total staff of 36 employed at the Lihepurura Kavango Trust are involved in managing the loan scheme. Six field co-ordinators are in charge of mobilising the rural community and assisting the loan applicants in drafting their respective project proposals and business plans. Each loan application form must be accompanied by a letter of motivation from the field co-ordinator explaining why the applicant should be considered for the loan. The letter acts as an evaluation of the viability of the income-generating project concerned, and should include technical justifications (i.e. land size and fertility level, distance from a water source, amount of labour required, cost estimation of material needed, etc.). The field co-ordinator is expected to clarify the technical details of the project to the loan administrator and the small-business advisor before the application is submitted to the deciding body, the Loan Reviewing Committee. The loan administrator is responsible for the financial status of the loan scheme. The loan administrator and the small business advisor do feasibility studies on the project for submission with recommendations to the Loan Reviewing Committee for a decision. The committee is composed of nine members: the Lihepurura Kavango Trust’s small-business advisor, loan administrator, executive director and manager for Programme Co-ordination and Planning; a member of Lihepurura’s Board of Trustees; and two community representatives who reside to the west and east of Rundu. Loans are monitored through ongoing support provided by the field co-ordinators, who regularly visit the businesses.

TABLE 7:
SUMMARY OF KEY DATA FOR LIHEPURURA KAVANGO TRUST LOANS

Area of operation (split urban/rural)	Kavango Region (80% rural; 20% urban)
Size of loan fund in N$	N$500 000
Origin of fund	Canamco
Duration of funding	1997-1999
Nature of control/ co-ordination with donor	Auditing from Canamco
% of fund disbursed as loans	Loans disbursement has not yet commenced
No. Of loans disbursed (gender breakdown)	As above
Average size of loan	N.A.
Upper limit (size)	N$20 000
Lower limit (size)	N$1 000
Average term	N.A.
Upper limit (term)	5 years
Lower limit (term)	15 months
Estimated processing time for loan (from submission to disbursement)	1 month
Processing capacity (no. of loans)	N.A.
Target industries/activities Any industries/activities excluded? If yes, which?	Agriculture 70% Processing manufacturing 30% (pottery, bakery) Yes Cuca shops
Collateral requirements	10% savings for cash loans
Training requirements	Compulsory for all borrowers
Links for training	Lihepurura Department for Small Business Enterprises Pahuka Training Programme
Interest charged	21,5% fixed
Provision of interest rate to cover operational costs, default, inflation	None
Target default ratio	N.A.
Actual default ratio (to date)	N.A.
Monitoring of borrowers	Regular visits to businesses by field co-ordinators

3.1.6 Lisikamena

Lisikamena is a non-profit financial institution which was set up in Rundu in 1994. Lisikamena provides credit through two loan schemes: the Individual Loan Scheme (ILS) and the Micro Loan Scheme (MLS). Operations are financed by commercial interest rates and funding from the Government of Austria through Care Austria. Donor control is asserted through an expatriate technical advisor. Lisikamena accounts are audited annually and the audit report is submitted to the Government of Austria. Funding from Care Austria should cover the period 1994-2002, but funds are secured only up to 1998. Future funding will be granted depending on Lisikamena’s sustainability, which should stand at 40% by the end of 1998 and 100% by the end of 2002. To achieve sustainability Lisikamena intends to reduce administration costs by fixing expenditure limits, to expand the MLS clientele, to improve the ILS assessment of loans and to expand to other regions in the long term.

Nine people are presently involved in managing the funds in the Rundu office: one administrator, one assistant administrator, two ILS credit officers, two MLS credit officers, one MLS manager, one overall manager and one technical advisor. Lisikamena co-operates with the Commercial Bank of Namibia and the Business Advisory Forum (BAF).

Individual Loan Scheme (ILS)

The ILS was started in 1994 to target small and micro businesses in the Kavango Region which do not receive any financial support from other institutions. Priority is given to:

• viable businesses either existing or starting out;
• female entrepreneurs (58%);
• manufacturers (58%);
• service outfits (10%); and
• retailing outfits (32%)

The current fund available for the ILS amounts to N$2 563 940, of which 77% had been disbursed by February 1998 to finance 147 loans. The loan size ranges from N$5 000 to N$20 000. The average ILS loan size is N$13 493. The loan repayment term varies between one and two years according to the loan amount and business particularities. The average repayment term is 21 months, while the average grace period is 1,5 months. Repayment is on a monthly basis and the current interest rate charged is 25%. In certain cases it may be possible to delay repayment. The following measures are taken after a six-month default period, should this occur: the loan outstanding is written off from the portfolio, legal action is taken and collateral or hire-purchased assets are repossessed. A good repayment record is a precondition for receiving a second loan. From March 1997 to February 1998 the default rate for the ILS was 20%, the target default ratio for this scheme being 10%.

The criteria applied in screening ILS loan applications are as follows:

• Purpose of the loan (loans should be used for business purposes only).
• Two days of training conducted by the Pahuka Training Programme.
• A business plan must be produced.
• Business location (businesses should be located in the Kavango Region).
• Collateral or guarantor is required.
• A contribution in cash or in kind of 10% of the loan amount is a prerequisite for all individual loans.
• Loans are only disbursed upon objective criteria concerning the viability of the business.

The Loan Committee – composed of three external members who are members of the business community – meets once a month and takes the final decision on the business plans submitted by Lisikamena’s manager and credit officer. The whole loan process can take up to two months. Lisikamena’s processing capacity is 20-25 potential loans per month, of which 25% (4-8 loans) are normally approved. Loans are usually disbursed by cheque in the name of the client. Once the loan has been disbursed, two credit officers assume the responsibility of paying monthly visits to the businesses.

Micro Lending Scheme (MLS)

Lisikamena’s MLS is a non-profit programme that was started in 1996 with the aim of disbursing small loans to women trading in markets to improve their businesses and increase their income. Priority is thus given to women (97%) selling vegetables, meat, secondhand clothing and various other items in Rundu markets. Men are accepted into the scheme (3%) only in exceptional circumstances.

The current fund available for the MLS amounts to N$705 658, of which 42% was disbursed by 1997 to finance 359 loans. The loan amount ranges from N$200 to N$5 000. The average loan amount is N$835, and the present interest rate charged for micro loans is 29%. The repayment term ranges from 1-12 months, the average term being nine months. Loans should be repaid in monthly installments, with the first installment due one month after the loan is received. No grace period for MLS loans is envisaged.

The criteria applied in screening MLS loan applications are as follows:

• Applicants must comprise a group of at least three members.
• Applicants must have been in business for more than six months (the MLS does not provide start-up funds).
• Payment of an individual entrance fee of N$5 must be made.
• An ID card or passport number is required to register.
• An up-front saving of 20% of the loan amount should be deposited by each member of the group as collateral.
• Businesses should be located in one of the designated markets around Rundu.

To register for the MLS, the applicant needs to form a group with three to 10 people from the same area, but not from the same family. Each of the group members should apply for the same loan amount. The group should adopt a name and elect a group leader and a treasurer. It is the treasurer’s task to collect the repayments from the other group members and to pay these either to the office or directly to the credit officer who regularly visits the group. MLS credit officers visit the businesses during this process to get to know the respective groups. Three MLS staff members (one manager and two credit officers) discuss each case and decide whether to approve the loan or not. After three weeks from the date of application the credit officers inform the group about the application. The entire approval stage normally takes one month. After approval, and before the loan is received, each group member should deposit 20% of the loan amount with Lisikamena. Thereafter they should continue depositing money each month until the loan is fully repaid. Loans are preferably disbursed by cheque to suppliers in the informal sector. If this is not possible, loans are disbursed in cash. Once a loan has been disbursed, two credit officers begin to pay weekly visits to the businesses. Once all the loans are fully repaid, the group members get their deposits back, or alternatively a second loan. Members can also decide to request a larger loan, and their savings can be used as a deposit on the next loan.

In case of default in repaying the loan, credit officers assert pressure on the group members by paying regular visits to the defaulters. If pressurising the community in this way proves unsuccessful and the 20% savings is insufficient to cover the amount owing, legal action is taken through a debt collector/lawyer. Lisikamena is reviewing the current MLS procedure for handling default (i.e. peer pressure), with the aim of setting up a more formalised system of action to be taken. From March 1997 to February 1998 the default rate for the MLS was 6%, the target rate being 5%.

Training is not compulsory for MLS loans but Lisikamena is at present considering the possibility of providing training for micro-loan borrowers also.

TABLE 8:
SUMMARY OF KEY DATA FOR LISIKAMENA LOANS

Area of operation (split urban/rural)	Kavango Region (50% urban and 50% rural for ILS; 100% urban for MLS)
Size of loan fund in N$	N$1 954 161 for ILS N$528 629 for MLS
Origin of fund	Government of Austria via Care Austria
Duration of funding	1994-2002
Nature of control/ co-ordination with donor	Future funding dependent on sustainability of fund, which should be reached by 2002.
% of fund disbursed as loans	77% for ILS 42% for MLS
No. of loans disbursed (gender breakdown)	147 for ILS (58% F; 42% M) 359 for MLS (97% F; 3% M)
Average size of loan	N$13 493 for ILS N$835 for MLS
Upper limit (size)	N$20 000 for ILS N$5 000 for MLS
Lower limit (size)	N$5 000 for ILS N$200 for MLS
Average term	21 months for ILS 9 months for MLS
Upper limit (term)	24 months for ILS 12 months for MLS
Lower limit (term)	12 months for ILS 1 month for MLS
Processing time for loan (from submission to disbursement)	2 months for ILS 1 month for MLS
Processing capacity (no. of loans)	22 loans per month
Target industries/activities Any industries/ activities excluded?	ILS: Manufacturing (58%) Services (10%) Retailing (32%) MLS: Market women (100%) None
Collateral requirements	20% deposit upfront for MLS Collateral/guarantor for ILS
Training requirements	Training from Pahuka Training Programme compulsory for ILS
Links for training	Pahuka Training Programme
Interest charged	25% for ILS 29% for MLS
Provision of interest rate to cover operational costs, default, inflation	24% for both schemes 5
Target default ratio	10% for ILS 5% for MLS
Actual default ratio (to date)	20% for ILS 6% for MLS
Monitoring of borrowers	ILS: Monthly visit by credit officers MLS: Weekly visit by credit officers

5 =The interest rate applied in both schemes currently covers 24% of the operational costs.

3.1.7 Okutumbatumba Hawkers’ Association (OHA)

The OHA was established in 1989 for the benefit of street hawkers. The association has sought to provide encouragement and assistance to its members through a range of activities aimed at improving the operation of their businesses as well as the legal, commercial and regulatory environment in which they operate. The OHA is comprised of 1 300 members, of whom 98% are women.

Through the years the OHA has relied on institutional support from international donors such as NORAD and World Education, and in this last year of operation, from Austria’s North-South Institute for Development Co-operation. In 1997 the association’s total capital stood at N$530 033, of which 94,5% was supplied from donors and the remaining 5,5% from annual membership fees.

The OHA is structured to consist of an executive office and seven branches located in various suburbs of Katutura, whose activities are co-ordinated by the executive office. Each branch has its own chairperson, secretary, treasurer and members.

The OHA renders the following services to its members:

• Advocacy
• Commercial services
• Access to finance
• Life skills and business courses
• Community development advisory services

The Bulk Buy Programme (BBP) constitutes the nucleus of the OHA. During 1990 the OHA realised that there was a need to improve the structure and management of the relationships existing between hawkers and suppliers, and to this end the BBP was implemented. The main objective of this programme is to enable poor hawkers to obtain goods on credit from local suppliers. OHA members are able purchase certain products at bulk or wholesale prices through the programme.

The BBP accommodates cash and credit clients. Cash clients graduate to become credit clients after three months of membership, depending on their repayment performance. During the first phase of the scheme credit ranges from a minimum of N$350 to a maximum of N$700. This amount is repayable within seven days. The second three months sees an increase of the credit limit from N$700 to N$5 000. The repayment period varies from seven days to one month depending on the type of goods sold and the turnover capacity of the business. The seven-day repayment period will apply to fast-moving consumer goods. Once the second loan has been successfully repaid, clients are linked to suppliers such as Hartlief meat suppliers or Pepsi Cola for bulk buying and/or facilities such as containers.

The BBP has thus far disbursed loans to 150 clients, amounting to N$300 000. There is no fixed fund for the scheme but individual agreements are signed between the OHA and suppliers. The conditions set down in these agreements are revised on an annual basis with consideration given to the demand for the goods supplied and the repayment rate achieved by the hawkers.

No interest is charged on BBP loans but the OHA intends to modify its approach to this scheme as from the year 2000 with a view to covering some of its operational costs. Currently the OHA’s administration costs are covered mainly by donor funds and the commission fee received from suppliers.

The main criteria set for accessing a BBP loan are as follows:

• Training in basic business management, which is provided within the OHA.
• The business should have a bank account, and the OHA and Bank Windhoek have an agreement that enables OHA members to open accounts.

The loan assessment stage encompasses three levels and begins at the relevant branch, where the programme chairperson evaluates the viability of the proposal. Once the application has been approved by the branch, the viability of the business is carefully assessed by personnel at OHA’s head office, who in turn submit their analysis to the Board of Directors for a final decision. The disbursement of BBP loans involves combining similar loan requests so that a bulk purchase from one supplier can be made.

Should any entrepreneur of a particular branch default, all loans to that branch are blocked until the situation has been clarified and the loan fully repaid by that entrepreneur.

The monitoring and follow-up of businesses participating in the scheme is done on a weekly basis by five officers who use a special form to control the performance of the ventures and simultaneously provide the necessary advice on addressing the problems encountered.

TABLE 9:
SUMMARY OF KEY DATA FOR OKUTUMBATUMBA LOANS

Area of operation (split urban/rural)	Katutura (100% urban)
Size of loan fund in N$	N$300 0006
Origin of fund	Agreement with suppliers
Duration of funding	Annual agreements with each supplier
Nature of control/ co-ordination with funder	Loans blocked for relevant branch in case of individual default
% of fund disbursed as loans	Undefined
No. of loans disbursed (gender breakdown)	150 clients (97,33% F; 2,67% M)
Average size of loan	N$2 000
Upper limit (size)	N$5 000
Lower limit (size)	N$350
Average term	14 days
Upper limit (term)	31 days
Lower limit (term)	7 days
Processing time for loan (from submission to disbursement)	1 month
Processing capacity (no. of loans)	N.A.
Target industries/activities	Hawkers (100%)
Collateral requirements	Good performance of the business
Training requirements	Training in business management compulsory
Links for training	None
Interest charged	None
Provision of interest rate to cover operational costs, default, inflation	None
Target default ratio	0%
Actual default ratio (to date)	5%
Monitoring of borrowers	Weekly visit to each business. Record of stocks and receipts. Monitoring of bank accounts.

6 = N$300 000 is the amount disbursed by OHA so far. OHA does not have a loan fund, given the programme’s own peculiarities.

3.2 PARASTATALS

3.2.1 Development Fund of Namibia (DFN)

The DFN was established in 1987 as the Development Fund of South West Africa/ Namibia, with an initial fund of N$40 million that was made available in 1985/86 by the colonial government’s Administration for Whites to provide development assistance. The DFN’s capital amounts to N$112 000 000, of which N$56 000 000 constitutes the loan portfolio, of which 19,2% has been disbursed to SMEs.

The DFN is governed by a Control Board of seven to nine members appointed by the Cabinet, two of whom are required to be officers in the government service, with the chairman designated by the Cabinet and the vice-chairman elected by the members of the Control Board.

The objectives and purpose of the fund, as set out in the Development Fund of Namibia Act, are as follows:

• To help promote Namibia’s economic and social development by allocating finance to needy entrepreneurs in rural areas to increase productivity and thus raise the living standards of people in less-developed areas.
• To finance defined projects considered to be economically viable, mainly in the form of loans so as to ensure that the fund’s capital is maintained, which in turn assures the continuity of the fund.
• To provide technical assistance and training in the identification, preparation, appraisal, implementation and management of development efforts.
• To assist with the implementation of defined and approved projects where this is requested and the necessary funds are provided.

The DFN currently has no branches or representative offices outside Windhoek, but it is in the process of opening two offices – one in Oshakati and the other in Keetmanshoop. The fund’s contact with customers is largely handled through the 13 Regional Councils of the government. The DFN’s lending programme for SMEs utilises commercial banks – primarily Bank Windhoek, First National Bank and the Commercial Bank of Namibia – for the disbursement and collection of loans.

The criteria applied in selecting loan applications include, inter alia, the following:

• The applicant must be a Namibian citizen or permanent resident.
• Applicants must be between 18 and 60 years of age.
• A business plan must be presented.
• Applicants must be willing to participate in a training course if necessary.
• Applicants may not have financial commitments to any other organisations.
• Applicants may not have access to other sources of finance.
• The business must be a processing or manufacturing enterprise.
• The business must be labour intensive and employ local people.
• The business must utilise or promote local raw materials where possible.
• The business must provide a service that meets the needs of the targeted communities.

Applications for loans under the SME scheme are assessed by a DFN Management Committee composed of four Control Board members and the DFN management team. The DFN notifies the commercial banks upon deciding to approve a loan, and the relevant banks then disburse the loan by way of guaranteed cheques to suppliers for assets, and in cash for working capital.

As stated above, the DFN is to open additional branches in the north and south of the country, which will serve to strengthen its follow-up capacity. Follow-up on businesses falling into arrears generally involves a monthly visit from the DFN, while follow-up on loan beneficiaries generally is undertaken twice per year.

The following action is taken in cases of default:

• Negotiations are held concerning the causes of the default.
• If legal action is taken, this will normally lead to the repossession of the assets acquired with the loan.

As stated in the Development Fund of Namibia Act, the measures to maintain sustainability of the fund are in general terms intended "to ensure that the capital of the Fund is maintained and the continuity of the Fund is assured".

It has to be noted that the DFN criteria and procedures are being revised (during 1998) and changes may occur. The following issues will be broached in the terms of reference proposed for a review of the DFN policy framework:

• Mission statement
• Financing policy
• The project
• Operations
• Review of criteria and conditions for SME loans

TABLE 10:
SUMMARY OF KEY DATA FOR DFN (SME) LOANS

Area of operation (split urban/rural)	Nationwide (urban/peri-urban 75%; rural 25%)
Size of loan fund (split) in N$	N$56 million for SME loan portfolio
Origin of fund	Government of Namibia
Duration of funding	Permanent
Nature of control/ co-ordination with funder	DFN Control Board
% of fund disbursed as loans7	19,2%
No. Of loans disbursed (gender breakdown)	200 (85% M; 15% F)
Average size of loan	N$54 000
Upper limit (size)	N$100 000
Lower limit (size)	N$5 000
Average term	5 years
Upper limit (term)	5 years
Lower limit (term)	5 years
Processing time for loan (from submission to disbursement)	5 weeks
Processing capacity (no. of loans)	10 loans per month
Target industries/activities Any industries/activities excluded? If yes, which?	Manufacturing/Processing 80% Service 20% Yes Trade
Collateral requirements	Hire-purchase arrangements
Training requirements	Training in basic business management skills compulsory
Links for training	None
Interest charged	15%
Provision of interest rate to cover operational costs, default, inflation	15% for operational costs (under revision)
Target default ratio	Below 10%
Actual default ratio (to date)	8%
Monitoring of borrowers	Monthly report from commercial banks to DFN audit manager; follow-up by audit manager and/or project manager

7 = The percentage corresponds to funds allocated to small enterprises, according to the respondent .

3.2.2 Namibia Development Corporation (NDC)

The NDC was established in 1993 by an Act of Parliament (Act 18 of 1993), and is the successor to the First National Development Corporation (FNDC). As such the NDC is the first development corporation to be established in the independent republic of Namibia. The NDC is currently a parastatal and is wholly owned by the Government of Namibia through its Ministry of Trade and Industry (MTI) – the custodian ministry.

Over the past few months a comprehensive restructuring has occurred within the NDC with a view to cutting costs while simultaneously providing a more efficient service to clients.

In 1998 the NDC secured a loan of N$65 million from the Development Bank of Southern Africa (DBSA). This loan should see the NDC slowly abandoning the provision of small loans to individual entrepreneurs and moving into the areas of wholesale finance, franchising, lease financing, venture capital, project appraisal, loan monitoring, aftercare services and marketing.

Several financial facilities are made available by the NDC for a wide variety of entrepreneurs. The schemes particularly pertinent to this study include the Small and Medium Scale Enterprise Scheme (SME) which provides loans ranging from N$1 000 to N$200 000, the SME Start-up Scheme for loans of up to N$80 000, the Small Builders Bridging Fund and the Tenants’ Aid Fund. Tenants or entrepreneurs affiliated to the SME Modules and Industrial Parks which the NDC is currently developing countrywide may borrow money from the Tenants’ Aid Fund to start or expand business operations within the SME Modules and Industrial Parks.

Small and Medium Scale Enterprise Scheme (SME)

The total loan capital available for SME loans is approximately N$5 000 000. This amount could be increased once the DBSA loan becomes operational. Of this capital the NDC disbursed N$3 626 458 in loans from 1993 to the end of 1997, making this scheme by far the largest informal lender to the SME sector in Namibia. The NDC aims to target a very wide clientele over very large distances. However, its primary focus is on small- to medium-sized enterprises in terms of capital allocation and job creation within the scheme.

Most lending within the scheme is collateralised and subject to a clause in the "hire purchase or suspensive sales" style. A minimum own contribution of 20% is also required. The SME loan scheme requires the submission of a business plan that is produced with the help of NDC business analysts who also evaluate and assess the application. The application process takes a minimum of seven weeks and involves a Pre-assessment Committee appraisal, a feasibility study, the writing of an investigation report or business plan, and finally an approval or rejection by the designated Management Committee. No clear indication can be given as to how long it will take to disburse the loans, as this factor is tied to the preconditions set in the contract signed between the NDC and the entrepreneur.

The NDC has adopted a policy to prioritise the manufacturing sector, as is reflected in the loan portfolio’s sectoral breakdown for 1996-1997:

• Manufacturing 50%
• Trade 15%
• Services and tourism 17,5%
• Small Builders Bridging Fund 17,5%

The scheme operates with a default rate of around 25%. The loan interest structure is differentiated according to the sectors of operation of the businesses: prime for manufacturing and tourism; prime plus 2% for trade; and prime plus 3% for services. This interest structure does not favour the SME funds due to the high risk associated with the manufacturing sector.

Small Builders Bridging Fund

This scheme was initiated to assist small builders’ companies to bridge the financial gap upon commencing with a building contract. The NDC has contributed an initial amount of N$1 million to the scheme (since 1995). The maximum financial assistance given is 35% of the value of the contract, and should amount to between N$10 000 and N$50 000. The conditions set for repayment require that the loan is repaid directly by the financier/owner of the building to undergo the construction work. This ensures that upon completion of the building contract the loan is repaid to the NDC. In 1996/97 a total of nine loans totaling N$187, 821 were disbursed, all of which were successfully repaid.

SME Start-Up Scheme

In 1996 the NDC introduced the SME Start-Up Scheme to replace the Mini Loan Scheme, the aim being to provide finance at market rates to new enterprises, with the hope of launching new entrepreneurs into sustainable business activities. The NDC contributed initial seed capital of N$1 million for the pilot phase of the scheme, and in one year managed to disburse 95,5% of the funds. Unfortunately, due to a very low repayment rate, the high risks involved and a lack of funds, the scheme was closed at the end of 1997.

The scope of assistance provided to all successful candidates was as follows:

• Total start-up capital to cover capital expenditure and running costs for the first three months.
• Business training.
• Marketing/match-making/buyer-seller contracts.
• Counselling and advice.

The conditions set for this assistance were as follows:

• A total capital requirement not exceeding N$80 000.
• Interest on the loan at prime.
• A repayment period of not more than five years.
• A grace period of three months and not exceeding 12 months.
• No own contribution by the entrepreneur towards the business and no form of collateral required.

TABLE 11:
SUMMARY KEY DATA FOR NDC LOANS

Area of operation (split urban/rural)	Nationwide (offices in Windhoek, Oshakati, Katima Mulilo, Rundu and Otjiwarongo)
Size of loan fund in N$	Total N$5 000 000
Origin of fund	NDC own funds, funds provided by the Namibian government, funds borrowed from the DBSA
Duration of funding	No limit
Nature of control/co-ordination with funder	Audited accounts and reports
% of fund disbursed as loans	72,5% (N$3 626 458)
No. of loans disbursed (gender breakdown)	108 (39% F)
Average size of loan	N$ 33 578
Upper limit (size)	N$200 000
Lower limit (size)	N$1 000
Average term	3 years
Upper limit (term)	5 years
Lower limit (term)	1 year
Processing time for loan (from submission to disbursement)	Minimum of 7 weeks
Processing capacity (no. of loans):	9-12 per month
Target industries/activities Any industries/activities excluded? If yes, which?	Manufacturing and Agro Industries 50% Services and Tourism 20% Small Builders Bridging Fund 20% Trade 10% Yes Those which may contribute towards social decay in Namibia
Collateral requirements	Collateral is required in all cases, e.g. suspensive sales arrangements on assets purchased with NDC financial assistance (HP), bonds on fixed property, cession of Permission to Occupy (PTO) certificates
Training requirements	Only on an "as-needed" basis through assistance from the IMLT and WVTC; and in-house training for provision of aftercare services
Interest charged	Varies by industry: prime for manufacturing and tourism; prime plus 2% for trade; prime plus 3% for services
Provisions of interest rate to cover operational cost, default, inflection	Inflation 15% Default 15,5% Operational costs 4,5%
Target default ratio	15,5%
Actual default ratio (to date)	25%
Monitoring of borrowers	Monthly, if possible, at offices or in the field

3.3 FORMAL CREDIT AND SAVING INSTITUTIONS

3.3.1 Commercial Bank of Namibia (CBN)

The CBN offers its clientele a wide range of products, ranging from personal loans and overdrafts to home loans and business loans at market-related interest rates, depending on risk. In accordance with the "Golden Banking Rule", these loans are partly or fully covered by collateral depending on the risk.

Apart from its common banking activities the CBN participates in credit schemes for SMEs funded by international donors and the Namibian government.

The first scheme in which the CBN became involved is the Limbandungila Credit Scheme funded by Co-operation for Development (see section 3.1.1 above). CD provides funds to guarantee the disbursement of small loans by the CBN to female entrepreneurs operating in Oshakati’s informal market. The CBN is responsible for disbursing the loans.

TABLE 12:
CBN LOANS DISBURSEMENT FROM 1996

Loan Size (N$)	Number of Clients	Total N$
800 1 500 2 500	126 56 7	100 800 84 000 17 500
	189	202 300

Due to a low repayment rate (50-70%, according to the bank) the programme has been put on hold, but not terminated. The CBN does not take legal action against clients who default, since that responsibility rests with the NGO concerned.

The CBN carries no risk in the scheme, and charges CD a fee for administering the scheme. For further information on the scheme please see section 3.1.1 above.

The CBN is also involved in the disbursement of loans for the Development Fund of Namibia (DFN), whose loan schemes comprise the Job Creation Fund and SME Fund. The Job Creation Fund loan amounts range from N$100 000 to N$1 million, and the SME Fund amounts range from N$15 000 to N$30 000. No information was provided as to the number of loans disbursed by the CBN thus far under these two funds.

Finally, the CBN is currently negotiating with International Finance Co-operation (IFC) to disburse loans under IFC’s Environment Lending Programme. These loans will go towards environmental objectives and will not benefit SMEs in Namibia.

3.3.2 Bank Windhoek

Bank Windhoek is in the process of implementing a pilot programme for SMEs known as the Value Package and aimed at emerging entrepreneurs.

Through this programme the bank will deliver the following services to small and micro entrepreneurs:

• Training in business management, cost accounting, budgeting, marketing and compiling a business plan.
• Financial assistance on the basis of the business plan compiled.
• Business advice during the running time of the loan.

The following criteria are applied in disbursing loans:

• Loan size: mainly in amounts ranging between N$1 000 and N$20 000.
• Repayment period: set in accordance with the business plan and cash-flow projection; two years on average.
• Interest rate: market-related; above prime.
• Sectors: manufacturing, trade, services and others.
• Security: none requested as a rule.

A large number of loans have been considered under this scheme during the past year, but details of these are unfortunately unavailable.

3.3.3 First National Bank (FNB)

FNB is involved in several schemes in collaboration with local and international NGOs and the Namibian government. The bank has been or otherwise plans to become involved in five different schemes offering loans to SMEs under varying conditions and criteria. The schemes are as follows:

• The Adult Skills Development for Self Employment (ASDSE) scheme is run in collaboration with the Ministry of Basic Education and Culture (MBEC) and Italian NGO Comitato Internazionale per lo Sviluppo dei Popoli (CISP) (see section 3.1.3 above).
• The Development Fund of Namibia (DFN) (see section 3.2.1 above).
• A new scheme with the Institute for Management and Leadership Training (IMLT).
• A scheme with the Northern Namibia Chamber of Commerce and Industry (NNRCCI), Evangelical Lutheran Church in Namibia (ELCIN) and Finnida.
• The Government Credit Guarantee Fund.

ADULT SKILLS DEVELOPMENT FOR SELF EMPLOYMENT (ASDSE)

FNB signed an agreement with the MBEC and CISP in respect of the ASDSE in July 1996, which is still operational. The ASDSE Credit Guarantee Scheme guarantees an amount equal to 80% of the value of the loans disbursed, with the remaining 20% of the loan guaranteed by FNB. The bank’s specific duties under this scheme are as follows:

• To manage a fixed-deposit account for the project funds and generate interest on the funds according to the rates defined.
• To disburse loans in advance to entrepreneurs either by depositing the funds into the relevant business accounts or by issuing bank-guaranteed cheques to the suppliers of the businesses.
• To participate in the selection of the businesses.
• To supply monthly financial reports on all loans disbursed.

The ASDSE Credit Guarantee Scheme is the only scheme implemented in Namibia in real partnership with a commercial bank, in that the bank involves itself in the project by bearing risk and sharing costs. See section 3.1.3 above for further details on the ASDSE project.

DEVELOPMENT FUND OF NAMIBIA (DFN)

Like other commercial banks FNB is a disbursing agent for the DFN. See section 3.2.1 above for further details on the DFN.

INSTITUTE FOR MANAGEMENT AND LEADERSHIP TRAINING (IMLT)

FNB recently donated a sum of N$250 000 to the IMLT, which was reinvested with FNB as guarantee funds for loans to be disbursed to selected entrepreneurs who have received training from the IMLT. These loans are made available only to the manufacturing and service sectors. The loans disbursed under this scheme will be in amounts of up to N$50 000, and thus far four loans totalling N$130 000 have been disbursed.

NORTHERN NAMIBIA CHAMBER OF COMMERCE AND INDUSTRY (NNRCCI) / EVANGELICAL LUTHERAN CHURCH IN NAMIBIA (ELCIN) / FINNIDA SCHEME

This scheme was launched in 1993 following a feasibility study conducted by the NNRCCI and funds totalling N$500 000 from Finnchurchaid and SIDA (Finnida).

This credit delivery scheme was terminated by FNB in March 1998 due to a very high default rate. FNB has decided not to disburse more loans under the scheme as the guarantee fund has been depleted as a result of the high default level. Some entrepreneurs are still repaying their loans but the bank believes that it has lost a sizeable sum of money. According to FNB the scheme failed for several reasons, chiefly the following:

• Loans were disbursed directly to the entrepreneurs rather than the suppliers, which meant that there was no real control over the use of the funds.
• Screening and follow-up procedures were poorly executed by the NNRCCI.
• The entrepreneurs regarded the money as church funds and therefore did not feel they needed to repay it.

GOVERNMENT CREDIT GUARANTEE FUND

FNB is presently negotiating with the Ministry of Trade and Industry concerning the Government Credit Guarantee Fund which will serve to guarantee loans disbursed to SMEs. It is envisaged that the fund will be implemented towards the end of 1998. It is also envisaged that NGOs will be involved in delivering services to support the fund.

3.3.4 The City Savings and Investment Bank (CSIB)

The CSIB does not currently have a scheme in place to fund SMEs. Term loans for a minimum of N$100 000 are disbursed to businesses, plus working capital based on the specific requirements of businesses. The CSIB is unbiased in its approach to granting loans to SMEs, in the sense that any loan application will be considered and approved if it is viable.

3.3.5 Standard Bank of Namibia (SBN)

The SBN Small and Medium Enterprises Pilot Scheme effectively started at the end of 1996. Ten accounts were initially decided upon for the purposes of the scheme, to serve mainly the following market mix:

• Manufacturing (textiles/clothing) enterprises
• Carpentry enterprises
• Small take-away shops or mobile shops
• Bakeries

There is no guarantee fund in place and the bank carries the total risk. The loan amount ranges from N$1 000 to N$5 000 for the first loan, from N$5 001 to N$10 000 for the second loan and from N$10 001 to N$20 000 for the third loan. The loans should be repaid within 12 months but the repayment period can be negotiated and a moratorium on capital considered. The interest rate applied is the prime rate.

By June 1998, 38 loans totalling N$320 300 had been disbursed under this scheme.

TABLE 13:
DISTRIBUTION OF SBN LOANS (1997-1998)

Loan Category (N$)	Number of loans
1st loan: 1 000 to 5 000	22
2nd loan: 5 001 to 10 000	6
3rd loan: 10 001 to 20 000	10

There have been two defaults on these loans, totalling N$8 383,35, as a result of which the scheme has a default rate of 5,26% on the number of loans disbursed and 2,85% on the total amount loaned. The bank offers no training for SMEs, but to gain access to the scheme the entrepreneur must show proof of having received trained either from the IMLT or from any institution that offers basic business skills training.

The manager of the bank’s SME portfolio, who is based at SBN’s Katutura branch which runs the scheme, analysed and assessed the strengths and weaknesses of the scheme during its pilot phase. Its main strengths are reported to be the following:

• SBN has been able to introduce a product that is reflective of the customer’s needs within the SME sector.
• The limited activities of other financial institutions in the field has secured a good market position for SBN.
• The monthly monitoring system applied enables a follow-up on outstanding payment immediately.
• Interest is low (i.e. prime) and the loan flexibility allowed is reflective of the customer’s need.
• No collateral or security is required from customers, even though the bank would prefer to request some where available.

The main weaknesses of the scheme are reportedly as follows:

• The scheme is not cost-effective at present, considering the amount of time spent in administering a loan.
• No collateral or security is required, which results in a low commitment to repaying a loan.

SBN also acts as agent for the Katutura Youth Enterprise Centre (KAYEC) scheme. KAYEC deposited a guarantee fund of N$40 000 and the risk is shared by KAYEC (80%) and the bank (20%). There are no costs involved for the administration of the scheme and SBN disburses loans of a maximum amount of N$5 000 to clients identified by KAYEC, with interest at the prime lending rate.

KAYEC applied for a loan from the DFN to increase the amount in the guarantee fund, but had not yet received a response at the time of writing.

3.3.6 NamPost Savings Bank

Namibia Post Limited (NamPost) is a mail transport and mail service organisation which is wholly government-owned and which resorts, as does Telecom Namibia, under Namibia Post and Telecom Holdings Limited. This holding company was managed by the Department of Post and Telecommunications until 1 August 1992 when new legislation rendered it an independent operation (see section 2(1)(a) of the Post and Telecommunications Companies Establishment Act, 1992).

The NamPost Savings Bank (NPOSB) is a fast-growing, profit-making division of NamPost which serves the Namibian population residing in the most outlying rural areas and sometimes in under-developed areas of the country. NPOSB clients carry out their banking transactions through more than 85 post offices and mobile agents countrywide. The company’s Finance Department managed the savings bank until August 1994 when a bank manager was appointed for the first time. The bank’s staff has increased from five members in 1983 to more than 30 in 1998. As part of the NPOSB’s development, NamPost signed an agreement in 1995 with the German Savings Bank Foundation for International Co-operation with the ultimate aim of developing the NPOSB into a fully-fledged savings bank.

The NPOSB currently offers four savings products: savings accounts, savings certificates, save-as-you-earn accounts (launched in September 1997) and fixed-term deposits (launched in April 1998). Additionally, the savings bank offers two money transfer services: postal and money orders.

It should be noted that the bank’s portfolio has tripled in the last five years, which attests to the statement above regarding its rapid growth. The number of savings account holders currently stands at more than 100 000 people. The interest paid to individuals is tax free and involves no service or transaction costs.

The current objective of the NPOSB is to encourage and promote saving among the inhabitants of Namibia, and to provide efficient banking and financial services to meet the requirements of both the rural and urban populations of the country.

In the draft Finance Policy on Small and Micro Enterprise in Namibia, which is currently under discussion at the Ministry of Trade and Industry, the NPOSB has been emphasised as an important outlet for the provision of financial services to SMEs, especially in the rural areas of the country. Namibia’s current Postal Act also foresees lending as a service that should be provided by the NPOSB.