The National Development Bank (NDB) has set out a number of recovery interventions geared towards attaining sound financial position as it enters transition into a commercial bank. According to information sourced from the bank’s insiders, NDB is expected to release a set of uninspiring financial results next week, attributed to poor performance in farming and start-up enterprises.
Although farming and start-up enterprises are commonly known as high risk ventures, the bank regards funding the two as part of its core mandate. Official information sourced from NDB indicates that its loan book is currently sitting at P1.3 billion. Of that agriculture constitutes about 50 percent.
“Our role as NDB is developmental with a focus on empowering Batswana and making sure we contribute towards economic diversification, hence our resolve to remain supportive of start up enterprises and farming ventures,” said the Bank’s Chief Executive Officer, Lorato Morapedi in written answers to our questions which sought to ascertain what makes the bank loyal to farming and start-up enterprises despite their high risk nature.
Given the “high risk” tag attached to agriculture and start-ups, most lending institutions, including commercial banks, rarely entertain thoughts of funding them. Therefore the bank has become the “first point of call” for agriculture and start-up businesses to promote economic diversification. The NDB executive has pointed out that supporting start-ups and farming ventures remain one of the bank’s fundamental mandates, which has transformed the lives of Batswana over its 51 years of existence.
Morapedi could not discuss NDB’s latest financial results, noting that it would be unprofessional for the bank to do so before they are officially made public. But those close to the management say the board is expected to approve the financial report before the end of the month, possibly next week. It is a move that comes hardly as a surprise to market observers who note that the bank’s financial results could be less exciting to its stakeholders. The lacklustre financial results could mainly be attributed to poor performance of both the agricultural sector and start-up enterprises, according market observers.
We note that the bank is implementing a new recovery plan which is intended to turnaround and improve its operational and financial performance. While no specific details were given, expectations are that the bank’s leadership will put more emphasis on robust credit risk and shareholder management. The turnaround plan is also expected to ready the bank for looming privatisation and commercialisation exercises.
While Bank of Botswana (BoB)’s accommodative monetary policy has provided start ups and other small businesses with access to affordable credit, it has on the other hand affected banks’ interest income, which is the main source of revenue, by reducing interest margins. Persistent drought and the re-occurrence of foot and mouth disease, especially in the Chobe area, has also posed serious challenges for both arable and livestock farmers and made it almost impossible for farmers to service their loans. These have been major factors to consider, especially because agriculture constitutes a significant share of NDB’s loan book. The prevailing scenario has brought about a significant increase in impairments or bad debts which is expected to adversely affect the bank’s profitability. NDB was established in 1967. Its input in entrepreneurship development and diversification of the national economy extends to provision of loan financing across various key economic sectors.These sectors include Agriculture, Commercial and Property, Industrial as well as Human Capital Development. The bank continues to support some key agricultural projects like livestock breeding, dry land farming and horticulture in Pandamatenga, Barolong farms (now Mosisedi), Sandvelt and High Vrav (Tuli Block).
NDB has also provided start-up capital for other business landmarks which include Oasis Motel, River Walk, Aquantile Hotel, Baisago University College and Macheng Mall in Hukuntsi.