TIRI MASAWI
Nearly one in four people who borrowed money from the Development Bank of Namibia (DBN) is not paying it back.
The bank’s own figures show that 22% of its loans are now defaulting, raising fresh questions about risk, oversight and who is benefiting from state-backed funding. This means that more than N$1 out of every N$5 loaned by DBN is not being repaid. With 22% of its loan book non-performing and N$579 million written off in a single year, pressure is mounting on the state lender to explain what went wrong.
The bank says the high default rate is linked to the effects of Covid-19 and pressures in key sectors of the economy. DBN spokesperson Jerome Mutumba, explained the trend and the steps the bank has taken to stabilise its loan portfolio.
“Our impairment (defaulting) ratio experienced a sharp increase from 12% in 2021 to 26% in 2024, largely driven by the heightened credit risk experienced during the Covid-19 pandemic and the prolonged strain it placed on key sectors of the economy,” he told Namibia Business Review last week.
He said the repayment ratio improved in the 2025 financial year.
“In the 2025 financial year, the ratio improved to 22%, marking the first year of recovery since 2021. This reduction reflects the gradual stabilisation of the operating environment, as well as the bank’s strengthened credit risk management, enhanced recovery efforts, and targeted support to distressed clients,” Mutumba said.
According to Bank of Namibia (BoN) guidelines last year, the accepted limit for the Non-Performing Loan (NPL) ratio—a key measure of loan problems—is 6%. While Namibia’s banking sector has remained strong, NPL ratios have sometimes approached or slightly exceeded this 6% mark, especially in 2024, due to a tough economic environment.
Mutumba said the bank follows strict financial regulations and due diligence processes to guard against political interference or corruption.
“All applicants undergo mandatory screening in line with the bank’s Anti Money Laundering and Counter Financing of Terrorism (AML/CFT) framework,” he said.
This, Mutumba said includes enhanced due diligence for Preferential Influential Persons (PIPs) (PIP/PEP’s), ensuring that every application is assessed objectively and in accordance with regulatory requirements with strict AML/CFT screening.
Others, he says, include enhanced due diligence, independent Board PIP committees, and transparent governance controls.
“All lending decisions are merit based and follow the same rigorous credit and risk assessment process for every applicant, ensuring fairness for all Namibians,” he said.
Mutumba added that the bank will provide a full report on its credit performance and financial position for the 2026 financial year once finalised.
THE SUSPECTS
The highest defaults were in land servicing, construction and manufacturing.
“Land servicing accounts for the highest proportion of defaults at 25%, followed by construction at 16% and manufacturing at 14%. These sectors are capital-intensive and are particularly exposed to long project cycles, delayed payments in the infrastructure value chain, and rising operational and input costs, which have affected cash flows and debt servicing capacity,” Mutumba said.
Mutumba said the bank closely monitors these sectors to guide risk management and client engagement.
Bye-Bye N$579 Million
During the 2025 financial year, DBN wrote off N$579 million in loans and advances.
“It is important to emphasise that an accounting writeoff does not mean that a client’s debt is forgiven or cancelled, nor does it reflect preferential treatment toward any borrower,” Mutumba said.
He explained that write-offs only occur after all recovery options are exhausted.
“This point is typically reached only after a borrower has failed to honour their repayment obligations and the bank has exhausted all reasonable recovery options. These steps usually include enforcing security, liquidating pledged assets, pursuing legal remedies, and listing the defaulting client with credit information bureaux, among other collection measures,” he said.
CALLS FOR REFORM
Independent Patriots for Change parliamentarian and shadow minister for finance, Michael Mwashindange, said the high default rate highlights deeper governance and structural problems.
“DBN must be transformed from a politically vulnerable lender into a disciplined, impact-driven development institution. If properly reformed, DBN can become a powerful engine of structural transformation in Namibia, financing productive growth, not politically connected defaulters,” he said.
Mwashindange said DBN must focus on productive sectors and long-term capital formation.
“As shadow minister of finance, my response would focus on reform, accountability, and strategic positioning. We must reform and refocus DBN’s Strategic Development Priorities,” he said.
Mwashindange said DBN must finance productive sectors such as agriculture, renewable energy, manufacturing, logistics, and SME growth, and support value addition in key sectors instead of consumption-driven or speculative projects.
“Co-finance large infrastructure and industrial projects aligned with national development plans and prioritise youth and women-led enterprises with structured risk management,” he said.
Mwashindange urged board members to be appointed through a transparent process based on financial, legal, and development expertise.
“DBN must implement aggressive recovery of non-performing loans, regardless of the status of borrowers and public blacklisting of willful defaulters and clear penalties as well as Legal action without exception,” he added.
Mwashindange called for performance-based management contracts and annual public audits.
“DBN should adopt a hybrid developmental-commercial model with The ‘Catalytic Co-Financing’ Model rather than lending alone. DBN should consider co-finance with commercial banks to share risks. The bank needs an SME Industrialisation Fund Model by creating a ring-fenced SME industrialisation window with Smaller, structured loans,” he said.
NATION FIRST… MAYBE
Social justice activist Herbert Jauch said DBN should prioritise projects that create jobs and national value.
“In general the DBN must be different from the commercial banks, their aim is to make profit,” he said.
Jauch said DBN must prioritise projects that have a huge impact in terms of job creation.
“I mean meaningful and sustainable jobs. If that happens there should not be a question of whether individuals line up and not pay. In fact if there are wealthy individuals should they even be accessing these loans or they can go to the commercial banks,” he said.
He said the bank is essential in addressing Namibia’s social and economic challenges, but only if its loans are directed at projects with real national impact.
WORRISOME SITUATION
A finance expert who spoke to Namibia Business Review said the high impairment ratio at DBN is worrisome.
“Such a high impairment ratio has a negative effect on the value of the loans book and the total assets. Naturally when the bank of Namibia is talking about impairment ratios of 5.4 % being high they are directly speaking about the commercial banks. The development finance institutions like DBN obviously have a low acceptable ratio but does the DBN know what exactly is their mandate?.”
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