When a noble idea fails

The collapse of the Small and Medium Enterprises Bank in Namibia has been the talk of the nation for a better part of this year. The High Court of Namibia’s decision to grant the Bank of Namibia’s motion to provisionally close the SME Bank, as it was known, has been subject of major headlines in the country.

The Namibian citizens now want blood and rightfully so. After all nearly N$1 billion (R1 billion) of taxpayers money was pumped into the now failed venture, just five years after it opened its doors. But it would appear as though the nation’s anger is misplaced and the situation is further being fuelled by people oversimplifying the situation.

But before we go deeper into the SME Bank’s problems and who is to blame, some background would suffice. The discussion around an SME Bank in Namibia became public knowledge in 2010. The idea was to create a collateral free bank that will serve the small businesses in the country, who found it impossible to gain access to funding from existing commercial banks in the country. Namibia does have the Development Bank of Namibia, which is a government owned entity established mainly to support those who previously would not gain access to funding. But perhaps government felt the Development Bank, which fell under the custody of the Finance Ministry, was not doing enough to empower the said portion of society.

So committed was the Namibian government to the empowerment of the previously disadvantaged that it had several other schemes going to help those excluded from partaking in the economy. One such initiative was the Small Business Credit Guarantee Scheme. This project used to receive money from the industrialisation ministry every year and its mandate was to guarantee small businesses who have no collateral when seeking loans from the commercial banks. Money to start the SME Bank was supposed to have come from this project. The industrialisation ministry then contracted consultants to find it the suitable technical partners to help run the SME Bank and that is how the Metropolitan Bank of Zimbabwe and its shareholder Enoch Kamushinda ended up being minority shareholders in the venture.

How did a noble idea turn into such a flop and what can the rest of SADC learn from it?

It is also about time that people appointed in decision-making structures or positions of trust realise that they are serving the public’s interest. Namibia’s central bank dropped the ball and heads should roll. We understand that the central bank deliberately gave the SME Bank special treatment and relaxed some of its rules just so the banking regulators could be in good books with politicians. So when the signs started emerging the central bank tried to cover them up and refused to take corrective action against the bank. Because it pretended all was well with the SME Bank, government then decided to ask all state owned entities to open accounts with the SME Bank to help capitalise it, while it embarked on its mission to help grow the small business sector in the country.

At the same time the SME Bank’s board of directors failed in their fiduciary responsibility to act in the interest of the bank and those it aimed to serve. At the end of the day, some received loans from the bank while they did not own nor run small businesses. And a number of the said board members were not servicing their loans.

Then the bank’s management decided to circumvent the rules and approved loans to conglomerates some of whom have been in existence longer than a 100 years. These big businesses took up larger loans which could have funded many small businesses.

It should be a lesson that rules and laws are put in place for a reason and that they should be followed to avoid these kind of disasters.

The Namibian authorities’ reluctance to take action against the culprits has also been fuelling a sense of xenophobia in Namibia.

Because the bank’s senior managers and those accused of wrong doing are mainly of Zimbabwean decent, many ordinary Namibian citizens are now pointing a finger at all Zimbabweans, many of whom have coexisted with them for decades now.

This behaviour is discounting the fact that many Zimbabwean owned small businesses in Namibia have also fallen victim to the SME Bank. But because now one is being held responsible, those innocent are in danger of facing reprisals just because of their country men who, with the help of politically connected Namibians, decided to loot the peoples’ money.

Can our politicians please learn from this and ensure that history does not repeat itself?

July 2017
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