THE SME Bank appears to have run out cash and is unable to issue loans, barely three months after it opened its doors to small businesses.
People with knowledge of the bank’s operations say the bank’s core business ground to a halt because most of the start up capital the bank had was spent on buying a building [said to be more than N$20m] and on generous staff salaries.
In addition, The Namibian learnt that a routine Bank of Namibia assessment of the SME Bank in March this year, found that the new entrant into the banking sector had no money to carry out its mandate.
Trade Minister Calle Schlettwein confirmed the existence of a Bank of Namibia report, which he said concluded that the SME Bank was not properly capitalised. He added that the bank needed more funds to back-up its loan book because the funds it has available were not enough.
Schlettwein also confirmed that part of the concerns raised by the Bank of Namibia were that the SME Bank spent most of its start up capital of N$60 million on day-to-day operations rather than funding SME loans.
He said the SME Bank needed at least N$1 billion to fulfil its mandate. “We need more than what is available. To make a meaningful contribution towards SME development, we need a bank with financial strength.”
Schlettwein said the SME Bank will address recommendations made by the Bank of Namibia in its assessment.
Sources close to both Bank of Namibia and the SME Bank told The Namibian that part of the criticism from central bank was that the SME Bank bought the building they operate from for millions before it went into strides with its core mandate of lending money for small and medium enterprises.
Some media reports last year stated that renovations to the building set the bank back by N$20 million.
SME Bank said the reports were wrong but have not provided what they claim to be the correct information.
The Chief Executive Officer of the bank Tawanda Mumvuma yesterday could not provide details around the purchase of the building or how much it cost, but said the figure of N$20 presented by The Namibian was “not correct”.
The municipal valuation of the building is over N$15,6 million. Property valuers who spoke to The Namibian said private valuations could put the price at more than N$20 million.
An inspection at the Deeds Office shows that the property has not changed ownership since the 1980s when it was bought by Rentmeerster Investments. A cursory search at the Registrar of Companies reveal that Rentmeerster directors are Kuehhirt Jens Christian, Kasper Helmut Erich and Nipko Klaus Dieter.
Schlettwein confirmed that the building located on 172 Jan Jonker road in Windhoek was bought but he could not provide any figures.
Central bank sources said that the SME Bank has allegedly been failing to meet the minimum cash reserve requirement by law, which is one percent of the total amount of money deposited into the bank by its clients. The SME Bank has refused to give any information about its business activities.
Both Bank of Namibia and SME Bank downplayed the severity of the situation saying that there was nothing untoward with the assessment.
SME Bank spokesperson Angrid Shimuafeni said it was not correct that they were under investigation, but she confirmed that a “routine assessment” was conducted in March.
Bank of Namibia spokesperson Ndangi Katoma said the central bank “as mandated by the banking law (Banking Institutions Act) conducted a targeted risk assessment in the month of May 2013 on SME Bank”.
But Bank of Namibia sources said the central bank was concerned whether clients’ money deposited into the SME Bank was secured and thus launched a low-key investigation.
Despite saying that the SME Bank met all requirements the Bank of Namibia’s assessment concluded that “as a new bank, achievement of the business plan projects and targets will require strong shareholder and public support for the bank’s long-term sustainability”.
The SME bank, which hit several hurdles when the central bank declined its application several years ago, was the brainchild of the Ministry of Trade and Industry together with Zimbabwean businesspeople, after the ministry’s SME Credit Guarantee scheme fell flat. The Namibian government holds a 65% stake in the bank.
