Private Sector Development Financing and Support for Small and Medium Enterprises : Case Study of The Development Bank of Namibia

The study investigates the impact made by the Development Bank of Namibia (DBN) on employment creation through the provision of loans to the private sector including Small and Medium Enterprises (SMEs). The Development Bank of Namibia extended its first loans in 2005; the study therefore evaluates the impact made for the period 2005 – 2009. Using the data on the investment made during the period under review simple descriptive statistics were applied in analysing the impact made. The results obtained suggest that the impact made in terms of job growth and employment creation is relatively small given the liquidity position of the bank as well as the devastating rates of unemployment in Namibia. Fewer new jobs were created in relation to the total number of the unemployed in Namibia, which suggest a rather slow pace. The slow pace therefore indicate that more work need to be done if the sky-rocketing unemployment rates in Namibia are to be brought to a minimum possible. The study then took a closer look at the sectoral spread of loans, which showed that most of the loans have gone into the non-traded sector which may indicate symptoms of the Dutch disease problem, and concluded on this front that policies should stimulate competitive enterprises in the traded sector for long term economic growth. The study then went further behind the numbers to explore some if the factors that may have accounted for such a slow pace in the job creation, these includes but not limited to, education level of entrepreneurs, the colonial past, entrepreneurship development in Namibia, issues of interest rates and availability of bankable projects as well as the resource curse problem. The education level of entrepreneurs was found to be low with a small percentage of them having attained tertiary education level. Of course, much of this can be due to different factors such as the cost of education, availability of formal training institutions, the marginal return to investing in education and so on, however due to time constraints and availability of data these factors are not thoroughly investigated in this paper. Moreover, part of the explanation for less education attained and entrepreneurship development in Namibia can be found in the colonial past where most Namibians were denied opportunities for formal education during the colonial era. While there are several studies done in Namibia mostly on the access to finances for SMEs especially by the Namibia Economic Policy Research Unit, to the best of my knowledge, there has never been a study looking at job creation and definitely not with a particular focus on an institution such as the Development Bank of Namibia, which makes this study focus particularly unique. And while the DBN may have carried out internal impact evaluation efforts, the external nature and thus critical approach of this study makes it interesting to read. -- Relevance to Development Studies -- The study contributes to numerous current debates on the role of the private sector in development efforts with an emphasis on the role that small business can play in many developing economies especially in employment creation. Development is a multidimensional process and therefore requires joint efforts and collaboration between the public and private sector and civil societies if meaningful and desirable change is to be realised. However, development must mean something in ordinary people’s lives, an economy only prosper if it lifts up everyone and not just the privileged few. The study is quite reverent to today’s development thinking in the sense that it emphasises that change must start in the lives of the people at the grass root level and on how their government can support them and help them be self reliant. The study emphasised on the need to stimulate entrepreneurship and support Small and Medium Enterprises. Although the focus here is on the specific case study of the Development Bank of Namibia on its impact on job creation over the last five years, the study perpetuate the need for critical evaluation of government interventions, programs and efforts geared toward development. Small businesses act as coping mechanisms for many working families especially those living in rural areas and faced with many challenges including agricultural shocks. With the extra income that small business owners earn from their businesses, they can send their children to school, pay for their medication and even save for retirement. Other than that, small businesses create jobs that many of these rural families rely on. The study is based on simple common sense logic; government should not replace the private sector as the true engine of economic growth, job creation and development. It should not do what individuals and businesses can do for themselves but government should do what they cannot do for themselves, and while government cannot guarantee profits for businesses, it can knock down barriers that stand in their way of progress. This include making sure that businesses can get the loans they need to invest, expand and grow and create more private sector jobs. For true creativity, innovation and ingenuity lies within the private sector.