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Rural and Microfinance: Namibian Experience

Rural and Microfinance: Namibian Experience. By Ebson Uanguta Bank of NAMIBIA. Overview of the Namibian Economy. Size of GDP – R30 Billion (US$5 Billion) Population – 1.8 Million inhabitants Unemployment – 30 percent Currency (Namibian dollar) is peg to the Rand (1:1). Background.

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Rural and Microfinance: Namibian Experience

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  1. Rural and Microfinance: Namibian Experience By Ebson Uanguta Bank of NAMIBIA

  2. Overview of the Namibian Economy • Size of GDP – R30 Billion (US$5 Billion) • Population – 1.8 Million inhabitants • Unemployment – 30 percent • Currency (Namibian dollar) is peg to the Rand (1:1)

  3. Background • SME and small holders have limited access to financial services in Namibia • It is more severe in rural areas – particularly for communal farmers • Lack of property rights – ownership of Land • Cannot meet collateral requirements of the commercial banks

  4. Rural Economy – Agriculture • Rural Economy dominated by Agricultural Activities • 2 Polar (Communal and Commercial) • Contributes about 4.5 percent to GDP • Sector provides most of the employment • According NLFS (2000) – 29 % of total employment in Namibia • It accounts for 53 % of rural employment

  5. Structure of Financial Sector • 4 commercial Banks (FNB, STB, CoBN and Bank Whk) • Branches concentrated in urban areas • Commercial banks have micro loan portfolio • Provided through SBCGS.

  6. Commercial Banks’ Assets

  7. Continued • Strong links to South African Banks • Competition not stiff • No formal barriers to entry • High Capital lay-out required – N$ 10 Million

  8. Why combanks reluctant to provide services to rural areas? • Lack of infrastructure • Economic activities are not well developed to justify the opening of branches • Lack of support services • Lack of proper security ( transportation of money)

  9. Micro finance structure (Survey) • 95 Branches country-wide – 2001 • Employing about 374 people • Clients were –individuals with full-time employment (clerks, teachers etc.) • 61 % of these branches were in urban areas • 39 % located in Rural areas.

  10. Continued • 44 % of clients were Women • 56 % - were Men • However, loans extensions 36% - women , while 64 % - men.

  11. Microfinance Assets • Total assets: • 2000 – N$230.1 million • 2001- N$ 185.6 million

  12. Microfinance challenges • Currently relies heavily on Donors’ money • Faces high default rate • Not sustainable, unless proper legislative framework is put in place. • No allow to mobilize deposits

  13. Strategies to promote rural finance • Introduce differentiated entry requirements • In other words, allow smaller banks • Encourage existing banks to extend to rural areas – through infrastructure development • Introduce some prudential and non-prudential measures for micro finance

  14. Continued • Legislative changes to allow Microfinance institutions to mobilize deposits

  15. I Thank you

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