By Hilary Mare
THE Namibia Chamber of Commerce and Industry (NCCI) Northern Branch has called on government to consider establishing a credit guarantee scheme to assist SMEs to access much-needed finance.
Branch chairperson Tomas Iindji highlighted that following the closure of the SME Bank, business people, particularly SMEs, have found it difficult to operate in the Namibian environment, where they now need to approach commercial institutions for financing.
“It’s a fact that financial inclusion, particularly for SMEs, is widely recognised as one of the key drivers of economic growth and job creation in all economies. However, in the process of development, SMEs face many difficulties and challenges, such as collateral. To solve this problem, some countries around the world have used different financial tools to help and assist SMEs to easily access finance, and in our case we definitely need government to step in with a new initiative,” Iindji said.
“It is therefore very critical and crucial for the government to seriously consider reintroducing the credit guarantee scheme, which was discontinued and was known as Small Business Credit Guarantee Scheme, if we want the SMEs to prosper. This will increase the country’s Gross Domestic Product (GDP). We hope that our government will seriously look at the possibility, in absence of SME Bank.”
Over the years, SME credit markets were notoriously characterised by market failures and imperfections, including inadequacy or lack of recognised collateral.
In order to address these market failures and imperfections, governments across the world have intervened in SME credit markets, in various forms.
“To be honest, a common form of intervention is represented by a credit guarantee scheme. A credit guarantee scheme will provide third-party credit risk mitigation to lenders, with the objective of increasing access to credit for SMEs.
“Despite various concerns raised by many SMEs, and looking back in the history of how our SME business suffered, due to lack of access to finance, especially due to the unavailability of the collateral, we think that as chamber, and the representative of the business fraternity, including SMEs, which are being regarded as the backbone of our economy, it is high time for the government to reintroduce the credit scheme, which was discontinued, in order to boost the economy,” Iindji emphasised.
Confidente. Lifting the Lid. Copyright © 2015