DBN to open in north, grow loan book and expand capacity

5 February 2010

The Development Bank will open its first branch outside Windhoek within the course of  this year to cater for increased demand for its services in the northern part of  the country.
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"We believe the time has come to start looking outside Windhoek. We have taken a decision to open an office in the northern regions to cater for that growing market,"  DBN CEO David Nuyoma said. The office will be located either in Ongwediva or Oshakati. The Bank is currently investigating various locations, in terms of  accessibility and reach. Nuyoma explained that the northern office is not intended to exclusively cater for the population in the immediate surrounding area, but is intended to reach broader areas. "As soon as logistics are in place, we're ready to move there," he added.

Nuyoma said a further priority for the Bank in the coming year would be to raise additional funding from the market.  "While we look forward to engaging the market accordingly, we hope that the investment climate is sufficiently conducive to raising additional capital for the Bank."

He noted that the Bank's structure has always been very lean, but that the Bank would need to increase its capacity to attain its targets. "We have been conscious of  the number of  people we bring aboard in respect of  the business on hand. The Bank started off  with a very small loan book, but currently has a loan book approaching 200 projects. That shows the volume of  business that is coming through. For us to maintain a reasonable grip on business, we have to recruit additional brains to come in and handle the growth."

Nuyoma also explained that the growth of  actual projects has been underpinned by an increase in applications. "That has necessitated us to look at our capacity, on the basis of  the need to handle and speed up the application process."

He also pointed out that the target of  growing loan book to in excess of  N$1 billion by the end of  2010 would also be dependent on human capital. "As we chase that kind of  target we must be appropriately structured to be able to deal with it, not only from the business generation side, but also from the need to tighten credit control as well as the management of  the finances of  the Bank. These respective aspects have to grow in tandem with the targets set," he said.

Referring to the economic downturn he said this had an adverse effect on some of  the country's major industries. It has also affected the services industries that support business development, he noted. "Obviously we are just coming out of a global recession. One of  the biggest challenges will remain full recovery and stabilisation of  the international economic situation."” He said companies in the tourism industry have to cope with reduced business, while exporters experienced reduced demand for their products.

Nuyoma highlighted the poor management of businesses and increased competition as challenges that could affect companies sustainability. "It is a challenge to the Bank's clients and becomes our challenge if they are not successful in managing their businesses," he said.

Nuyoma said a further challenge impacting on the economy is unemployment. "When one listens to unemployment figures being cited, you see that the numbers are very high and what it basically mean is, there is pressure on relevant stakeholders to create jobs and DBN is no exception in that regard."

Nuyoma also highlighted the sustainability and viability of  applications as one of  the Bank's major challenges. He said, while applicants are convinced their projects are viable, the Bank follows a rigorous due diligence process "to determine the facts as we see them and to use our discretion whether such applications merit our support or not in terms of  whether they are viable."

"I am happy to see that a microfinance bank has been established in the country. This is a much needed intervention. It remains a great area of  need and it will present challenges to everyone that's involved in development," he went on to say.

He pointed out that the characteristics of  the kind of  client financed by the Bank include those who have minimal assets causing the ratio between debt and equity to be skewed towards debt. This puts undue pressure on projects to be sustainable over time. He added that the minimal assets offered then also results in very limited security being available. And in event of  failure of  such businesses, the Bank remains highly exposed. "That is a major challenge that we need to find solutions to. Because what we want to see is a continuation of  the bank on a sustainable basis, of  course while at the same time helping those with viable propositions."

"We are always trying to be responsive to the needs of  potential clients. Today we have different forms of  support relevant to the needs of  those who come through our doors looking for support. Last year the product offering we brought to the table was Equity Financing. Before that we had Preference Shares. We had Franchise Financing, Term Loans and also came up with Trade Financing and the popular Bridging Finance facility that is particularly geared towards tenderers."

He said the focus now is to broaden the Bank's reach through more appropriate offerings. "We have introduced a research department, which is looking at new products and we hope that before the end of  the year we would be in a position to make some announcements in this regard."

"We hope to expand the Management Information System to all critical players within the Bank. We are also looking at perfecting our business processes in order to make the organisation more robust and efficient," he concluded.