DBS caring for individuals, small and medium businesses |09 April 2021

We have to agree that the financial situation of many small/medium and big businesses is not healthy right now. With the need to support the Seychelles economy as a result of the impact of Covid-19, the Central Bank of Seychelles and Seychelles Banking Association announced a relief scheme structured to assist businesses affected by this global economic crisis.

We spoke with the chief executive of the Development Bank of Seychelles (DBS), Daniel Gappy and Rana Fernandes to know more about the different loans the bank is offering.

The Development Bank of Seychelles was created in 1977 as a joint venture between the government and other shareholders namely Caisse Française de Cooperation, European Investment Bank, DEG, Standard Chartered Bank and Barclays Bank.  

During the 40 years, DBS has showed the ability to adapt to market changes and demands and has not hesitated whenever necessary to diversify its services to meet the needs of its customers. From eight staff members in 1978, DBS now employs 58 dedicated staff members committed to making the vision of the bank a reality.  The bank is presently managed entirely by a Seychellois team.  Through a well-established training scheme, the bank offers overseas as well as local training to all its staff members and consequently has produced several graduates and professional staff.

Seychelles NATION: Please tell us about the various loans DBS is offering and who are eligible for them? 

DBS:All financial institutions engaged in providing loans – be it on short/medium/long term basis – will always follow internal procedures and prevailing policies in order to appraise the intended project for a start-up or expansion of an existing business activity in order to know:-

1. Who is the borrower, while assessing his/her credibility and ability to manage a business successfully
2. The risks, viability and sustainability of the project to be implemented
3. The Contribution/Equity to be injected by the promoter
4. The cash flow in order to identify the principal source of repayment generated by the project and debt repayment ability
5. The collateral/security to act as a source of repayment of the debt if other sources have failed.

Though the ease of access to loans may be seen as a lengthy and cumbersome procedure, the above are imperative for any financial institution in order to appraise and minimise any risks associated with the on lending of funds.

Equity and collateral are two of the main ‘factors’ that many applicants find difficult to come to terms with.  

Most of the times there are misunderstanding/misinterpretation among our clients as they feel that they have provided sufficient security for a loan yet the bank is requesting for personal contribution. The concept/ purpose of a security versus personal contribution must not be confused/mixed unless the rational of same is clearly explained to them.

Seychelles NATION: What are the minimum and maximum amount an applicant can receive?

DBS:The concept of a project will always remain the ownership of the promoter. However if financial assistance is a requirement, the latter must also contribute towards the investment. By doing so, it shows and proves the borrowers’ commitments/fidelity towards:-

1. The successful implementation and continuous existence of the intended business
2. Honouring and correctly servicing the financial debt given that they have injected funds which are usually from their personal savings (after having worked hard at collecting same)

DBS requirement for personal contribution can be considered as very competitive in comparison to other financial institutions. Owner’s contributions towards a project being financed or under the management of DBS are as per accompanying table.

However, at the exception of ADF scheme, a promoter will be required to inject additional funds should:-

1. Its cash flow is unable to sustain the financial debt;
2. The debt service ratio which is presently set at 1.25 is not being met.

DBS can be flexible on the Debt Service Ratio as long as the business is profitable and capable of generating positive cash flow. However, in the event that a promoter is unable to inject further funds as equity, at the most DBS will advise the client to scale down the project or altogether the financing is rejected in order to avoid or minimise the risks associated to such investment.

Seychelles NATION: What is the total amount put aside for these loans or credit facilities? 

DBS: DBS and SME schemes are supported from our own funds raised through commercial banks, lines of credit or issuing of bonds. As for the funds under management these are funded by the government.

Seychelles NATION: Tell us more about the Covid-Relief scheme?                                                                                    

DBS: The purpose of the fund is to help businesses with their critical expenses such as paying rent, salaries, utilities, taxes, goods, service contracts, training cost, redundancy cost, for 6 months - working capital loan. This loan is eligible for clients of DBS, MSME, MSME with annual turnover less than R25 million, self-employed individuals impacted by Covid. Borrowers who were in default before February 2020. Those in NPL will be considered on a case by case basis depending on their history from Jan to Dec 2019. The minimum loan amount is R50,000 and the maximum will depend on the turnover of the business per annum at an interest rate of 1.5%. For this specific loan, the borrower is not required to contribute any personal contribution and has a maximum of three years to repay the loan. There is no application fee and the maximum grace period is 12 months inclusive in the three repayments.

Compiled by Vidya Gappy