Development Bank of Namibia looks to the future
The Development Bank of Namibia (DBN) recently celebrated its 15th anniversary. Opened in 2004, the Bank has since contributed to a wide range of economic activities and socio-economic wellbeing through its finance.
At its opening in 2004, DBN had a single employee, Founding Chief Executive Officer (CEO) David Nuuyoma, and operated from a single office equipped with a fax machine. At the end of its 2004 financial year, the Bank had assets of N$138 million and a staff complement of 16. Fifteen years on, at the end of its 2019 financial year, its assets amount to N$9.7 billion and it has a staff complement of 105.
Talking about the Bank’s asset growth, current CEO Martin Inkumbi says the Bank was capitalised by its shareholder the Ministry of Finance, but that its primary source of growth has been its ability to attract further capital on the back of government’s equity capital contribution. Prior to opening, he says, the Bank adopted a commercial model in terms of which repayment of loans – with interest – is primarily reallocated to additional lending, with a portion set aside for prudent reserves. In addition to subsequent tranches from its shareholder, the commercial approach to lending has had a significant multiplier effect on the Bank’s ability to finance additional projects.
Explaining the importance of a strong asset base, Inkumbi says the amount is composed primarily of loans. Loans to the value of N$8.8 billion have currently been disbursed.
Forms of finance
However, Inkumbi says that the Bank’s impact on economic activity extends beyond lending and it has had a catalytic effect on forms of finance.
To illustrate the point, he says that the Bank has introduced new sectoral models for finance. In this regard, he says that the Bank pioneered contract-based finance to enable contractors to undertake projects for which they would not have previously had operating capital or assets. This he says has made the contracting subsector more inclusive.
He points to finance for renewable energy as another feather in DBN’s cap. In order to enable privately owned renewable energy utilities to participate in electricity generation, regulatory change had to be paired with a suitable financing model. In addition to photovoltaic plants, the Bank also provided finance for the Ombepo wind farm, another first in Namibia.
Finally, he highlights the Bank’s apex finance which provides capital to on-lenders. Although the Bank is noted for providing capital to two local commercial banks and the Namibia Procurement Fund in the past for SME finance, what is less well known is that the Bank provides apex microfinance for entities which on-lend small amounts for business activities with beneficial development impacts. He points to the Banks capital provision to boost Postfin, the lending arm of Nampost Savings Bank.
Approaches to finance
Inkumbi goes on to say that the Bank has not only provided new forms of finance but has also implemented new approaches to finance.
The Bank, he says, has taken the lead in providing mentoring for SMEs. This has the effect of reducing risk inherent in financing start-up SMEs and makes the enterprises more sustainable.
He goes on to say that the Bank was also the first financial enterprise to implement an environmental and social management (ESM) system. The ESM Unit monitors all projects financed by the Bank for compliance with local environmental, labour and social legislation and regulations. The ESM Unit also vets applications to ensure that potential lending will not have negative environmental and / or social impacts.
Confidence in the Bank
Inkumbi states that DBN has earned and maintains a high level of confidence. This is attributable to its advanced risk management and robust governance. Risk management, he says, enables the Bank to assess risks in advance and manage them if they are seen to materialise. This is in keeping with the requirement for the Bank to provide finance for projects with a higher risk than would be acceptable to commercial sources of finance.
Inkumbi emphasises that DBN is not in competition with commercial banks, but complements them in the financing landscape and may provide them with opportunities to participate in development activities by acting as a proxy for direct finance, using lines of credit from commercial banks to finance projects which do not fit with their mandates, as well as absorbing and managing the associated risks.
He says that DBN also manages funds advanced for Namibian development by multinational development finance institutions such as the African Development Bank (AfDB) and the German Development Bank, the Kreditanstalt für Wiederaufbau (KfW).
Inkumbi points out that the Bank takes pride in the confidence of subscribers to its Bond Programme which is listed on the NSX. He says the Bank is currently servicing N$700 million in bonds, and negotiations are underway with other investors who are seeking to subscribe to approximately N$400 million in additional bonds.
Although Fitch recently downgraded DBN to level of its shareholder, the ratings agency maintained the local rating category of AA, in a sign that it believes the Bank is able to service the bonds that it issues and is investment grade.
Plans and new developments
On the Bank’s future, Inkumbi says DBN adapts to the needs of the economic environment to develop products and operations that stimulate economic activity. The Bank will continue to evolve and learn.
Currently, the Bank is developing a facility for youth artisans which will address the widespread need for vocational skills to further industrialisation. When implemented, the youth artisan facility is envisaged to have a robust mentoring and training component to ensure that the enterprises are sustainable.
He also says that the Bank is developing a credit guarantee scheme which will be made available to commercial sources of finance, such as banks, to reduce the risk of financing SMEs with sound business plans and cash flow projections, but with lower levels of collateral. The assurance scheme will enable banks to finance a greater number of SMEs.
Excellence is basis for success
Inkumbi stresses that the Bank’s financial capacity is secondary to the level of excellence that it instils in its staff. Although DBN has significant financing capacity in its own reserves, and the confidence of external sources of finance, its ability to effectively deploy its finance with successful results is its most important characteristic and this is dependent on its human capital.
In order to maintain and develop its degree of excellence, the Bank has shaped itself as a learning organisation. In addition to observing and evolving to the needs of the economy, its human capital is engaged in a continuous process of professional development, individually and as functions within the Bank.
The result is a streamlined machine that not only serves the mandate of DBN, but also serves Namibia. As proof of this, Inkumbi offers the fact that although the Bank has a very high staff retention ratio, individuals who leave the Bank do so to enter senior leadership positions in the financial sector and Government.
In conclusion, Inkumbi foresees that the Bank will continue to rise to challenges with excellence and innovation in the coming years and make a significant contribution to growing maturity in the Namibian economy.