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The emergence of microfinance activities in Namibia can be said to have been a result of the unavailability of financial services for the majority of the country’s population, especially those who were living in the underdeveloped rural areas and small towns, both before the country obtained its political independence in 1990 and just after independence. The commercial banks existing in the country at the time were only serving a small section of the population especially in terms of the provision of credit, as they were mostly dealing with the more affluent clients and businesses (Republic of Namibia, no date). The root cause of this situation was the discriminatory policies of the apartheid system in place at the time (i.e. prior to the country obtaining its political independence), which neglected certain groups of the population – a situation that resulted in a skewed distribution of the country’s income among its population, discussed earlier in the chapter, as well as pervasive poverty, especially in the informal sector. This situation begged to be salvaged, hence the birth of microfinance-related activities in the country.

During the initial stages of microfinance-related activities in Namibia, which were mainly in the form of providing credit to micro entrepreneurs and small businesses, donors and NGOs were mostly the drivers of these activities, although other institutions such as public finance institutions32 _{and commercial banks also became involved. According to information from}

Tonin, Dieci, Ricoveri, Foresi and Hansohm (1998), donors, in conjunction with NGOs, started setting up various loan schemes in Namibia as far back as the 1980s, mainly aimed at financing developmental and welfare activities.

Tonin et al. (1998) point to the following as having been some of the prominent donors and NGO-owned microfinance projects at the time: (1) Okutumbatumba Hawkers’ Association, established in 1989, which catered for street hawkers in Windhoek; (2) a Hanns Seidel Foundation-sponsored Institute of Management and Leadership Training, which initiated a Revolving Credit Fund in 1994 as a pilot scheme for credit provision to small enterprises in Namibia; (3) the Lisikamena, which used to operate in the Kavango region (in the northeastern part of the country) and used to provide credit through two loan schemes, namely the Individual Loan Scheme that started in 1994 and the Micro Loan Scheme implemented in 1996; (4) the Community Small Enterprise Development Agency established

32 _{Public finance institutions that were involved at the time are the Development Fund of Namibia (DFN), which was initially}

established before independence in 1987 as the Development Fund of South West Africa, and the Namibia Development Corporation (NDC), established in 1993.

in 1995,33 _{which, through a Savings and Credit Scheme (named Ngaturitunge Pamwe),}34

provided credit to micro and small businesses operating in Windhoek and its outskirts of Katutura; (5) the Adult Skills Development for Self-Employment set up by the Ministry of Basic Education and Culture in 1996 with the assistance of an Italian NGO, Comitato Internazionale per lo Sviluppo dei Popoli, and the European Commission, and that intended “to link Namibia’s education system with efforts to create a favourable environment for job creation and self-employment in the country” (Tonin et al., 1998: 25); (6) Limbandungila, a credit scheme established in 1996 by a London-based NGO called Co-operation for Development, which targeted female entrepreneurs in the informal market of the Oshakati town in the northern part of Namibia; (7) the Lihepurura Kavango Trust, a five-year programme, with an end period of 1997, implemented by Oxfam Canada through the NGO Canada Namibia Cooperation (Canamco) in the Kavango region and which was aimed at “improving the quality of life of the rural poor in the region by providing the necessary assistance to increase agricultural production and build cottage industries and co-operatives in the region” (Tonin et al., 1998:30); (8) Koshi Yomuti,35 _{established in 2002 as a}

microfinance pilot project with the sponsorship of FIDES AG (Switzerland), the Namibian Department of Trade and Industry and GTZ (the Deutsche Gesellschaft für Internationale Zusammenarbeit) (now GIZ, the Deutsche Gesellschaft für Technische Zusammenarbeit), and which used to operate only in the north central underserved regions of the country; and (9) a microfinance arm of Project Hope, a USAID-sponsored welfare-oriented NGO established in 2005 that focused on assisting women who took care of orphans and vulnerable children, with the objective of enabling them to participate in economic activities and improve their standard of living.

From the above listed donor-sponsored and NGO-owned microfinance projects, it is clear that the activities were mainly location-bound, i.e. targeting to serve a specific group of a community (such as women) in a specific locality (mostly a town). Another notable aspect is the fact that the NGO schemes were more women-biased schemes, and this could suggest that women were considered more as welfare enhancers then men. In general, these schemes were characterised by low default rates, which could be ascribed to the normal risk mitigation strategies and strict control measures exerted by the respective donors that sponsored the schemes.

33 _{This was initially established in 1991 and operated under a different name as the National Job Creation Service.}

34 _{This is translated in English as ‘let’s develop ourselves together’}

In terms of government-owned institutions, the NDC, established in 1993 by statute (the Namibia Development Corporation Act, Act No. 18 of 1993) to replace the First National Development Corporation, which existed before the country obtained political independence, used to operate four schemes in the 1990s, namely the SME scheme that provided loans in the range of N$1 000 to N$200 000, a start-up scheme for loans of up to N$80 000, the Small Builders Bridging Fund and a Tenants’ Aid Fund (Tonin et al., 1998). According to Tonin et al. (1998), the loan fund for the SME scheme amounted to approximately N$5 million, which made it the largest informal lender to the SME sector at the time. Further, the DFN, which was initially established before independence in 1987 as the Development Fund of South West Africa, had a loan portfolio of N$56 million. Its objectives had the overall essence of engaging in activities that would promote Namibia’s economic and social development through the allocation of finance to needy entrepreneurs, financing defined projects to ensure the fund’s sustainability, providing technical assistance and training in development-related activities and assisting with the implementation of approved projects. The fund operated an SME lending scheme in conjunction with commercial banks (Bank Windhoek, FNB and the then Commercial Bank of Namibia) in terms of the disbursements and collection of loans, while the fund itself assessed applications and made allocation decisions (Tonin et al., 1998). The scheme, which also had a bias for women (i.e. 85 per cent of the disbursed loans went to women), ceased operating and its capital went to establish the DBN in 1994, an institution that has also continued to play a role in the SME sector, as discussed earlier in Chapter 2.

The 1990s also saw the involvement of some commercial banks in the provision of microfinance-related loans in Namibia. They either operated jointly with some of the NGOs and/or public finance institutions, as is evident from the above discussion, or developed their own products to enter the market. In terms of own initiated activities, the FNB launched a scheme in 1993, operated jointly with the Northern Namibia Chamber of Commerce and Industry, the Evangelical Lutheran Church in Namibia and the Finnish International Development Agency, but it terminated the scheme in 1998 due to a very high default rate (Tonin et al., 1998). The bank later began to actively develop its own SME financing products and has since been one of the active players in SME financing.

Standard Bank of Namibia also started a SME pilot scheme in 1996, which targeted sectors such as manufacturing enterprises, carpentry, small take-away shops, mobile shops and bakeries (Tonin et al., 1998). In 2012, the bank also launched an SME financing product called SME quick loans to increase its participation in that sphere (Diza, 2013). The then

Commercial Bank of Namibia participated in credit schemes for SMEs funded by international donors and the government of the Republic of Namibia, as mentioned earlier, while NedBank Namibia’s participation in the microfinance sector was through the acquisition of a microlender called the Finance in Education Pty Ltd in 2002 and another scheme called NedLoan, which was deregistered later (Tonin et al., 1998). Bank Windhoek entered into partnership with the now defunct Small Business Credit Guarantee Scheme of the Ministry of Trade and Industry, which was set up in 1999 to provide financial assistance to new and existing entrepreneurs that lacked collateral for accessing credit (Tonin et al., 1998). The bank actually became the pioneer in setting up an independent SME branch later, which was still in existence at the time conducting this study.

In summary, what is noteworthy from the above discussion on early-day microfinance activities in Namibia is the fact that most of the schemes were donor-sponsored NGO MFIs that ceased to operate after donors pulled out. This gives a hint that they were donor- dependent and not sustainable schemes. Further, most of those schemes were jointly operated by NGOs and commercial banks and/or parastatals and commercial banks. While such cooperation also took place in the country at the time of this study, it was on a much reduced scale, as will be evident in later discussions. This could be because most commercial banks have in recent years also entered the microlending business by either establishing separate microlending branches/institutions or creating units within their banks that are dedicated to offering credit to SMEs. It is the view of the researcher that the early- day schemes laid the foundation and raised awareness with regard to the need, approach and methods regarding microlending or microfinancing, and this example may have culminated into the creation of the schemes prevailing in the country.