The Development Bank of Namibia (DBN) is in the process of developing and establishing a Venture Capital Fund (VCF).
The VCF comes more than two years after the development of the country’s SME Financing Strategy.
Namibia’s SME Financing Strategy was developed in August 2020 and launched by the Ministry of Finance, with the DBN to implement it.
The Fund’s financing strategy comprises of three complementary components, the Credit Guarantee Scheme (CGS), the VCF and the Mentoring and Coaching Programme (MCP).
The bank had not implemented the VCF after deciding to focus on the CGS and the MCP first.
The initiative acknowledges the importance of SMEs in the Namibian economy and seeks to improve access to funding and capital for SMEs.
The Fund will be established, to invest in identified SMEs, with a strong growth potential, but unable to borrow or acquire additional capital.
“The Fund will act as an equity investor in established SMEs, by providing funding in exchange for equity. The SMEs, in which the Fund invests, would then use the equity funding for growth needs and operating capital. The Fund would receive returns through growth of the value of its investments in SMEs,” DBN’s Head of Marketing and Corporate Communication Jerome Mutumba said.
The Fund will be established in the form of a trust under the Trust Moneys Protection Act 34 of 1934 and is set to be registered as an independent special purpose vehicle (SPV) in terms of the regulations of the Pension Funds Act 24 of 1956, he said.
The Fund will be governed by a board of trustees, a majority of whom will be independent, and will in the near future start recruiting executives.
DBN further promises to adhere to relevant registration processes and requirements, in particular the applicable regulations of the Master of the High Court and the Namibia Financial Institutions Supervisory Authority (NAMFISA).
Mutumba is optimistic that the Fund would lead to catalytic transformation of Namibia’s SME sector, through exposure to equity, resultantly strengthening the entrepreneurs.
