By Dhiladhila Magazine · Issue 10

A public fund lends at 2% without security. The generosity is deliberate, and it has a price someone has to carry.

In the three months to the end of January 2026, the National Youth Development Fund approved N$14.9 million in financing for 46 youth-owned enterprises through the Development Bank of Namibia. The headline sum is small; the terms are the story. This is money lent at 2% to 4%, without collateral, to borrowers a commercial bank would rarely touch, and the fund does that on purpose.

That design carries a cost the approval figure does not show. Concessional pricing and waived security are a subsidy, drawn from a N$500 million capitalisation (about US$27 million) of which N$257 million is committed for the 2025/26 year. The question for anyone reading this as capital, rather than charity, is who absorbs the gap between a 2% loan and its real risk.

Capital priced below its risk

A start-up loan of N$60,000 to N$200,000 at 2% is priced far under what the same exposure would fetch in the market. Young, unsecured, first-time borrowers are exactly the profile lenders decline or price steeply. The fund inverts that logic deliberately, treating access as the objective and the discount as the tool.

The distance between 2% and a market rate is a subsidy in all but name. It is met by the state’s capital base, which earns less than it could and expects a share of loans not to return. That is defensible as policy, but it should be named as what it is, rather than read as ordinary lending.

A 2% unsecured loan is a subsidy wearing the clothes of a loan.

The three-tier structure

The fund lends in bands: N$60,000 to N$200,000 at 2% for start-ups, N$200,000 to N$1 million at 3% for growth, and above N$1 million at 4% for expansion. The rate rises with the amount, which mildly prices scale, yet every tier sits below commercial cost. Repayment runs to five years with a grace period of up to twelve months.

The grace period matters more than the rate. A young business that pays nothing in its first year keeps cash inside the venture when it is most fragile. For capital designed to survive early losses, forbearance at the outset is worth more than a headline percentage.

The twelve-month grace period, not the interest rate, is the fund’s real concession.

Three balance sheets, one fund

The money is channelled through the Development Bank of Namibia, Agribank and the Environmental Investment Fund, each an existing development-finance institution with its own book. That routes disbursement through bodies that already assess and lend, rather than building a new institution from nothing.

It also spreads the risk of a concessional book across three balance sheets accustomed to carrying it. Using standing lenders is cheaper and quicker than a fresh agency, though it ties the fund’s performance to how well those bodies price and recover youth loans.

Routing the money through existing lenders buys speed and shares the loss.

What the investor reads

For a private co-financier, the fund is less a competitor than a first-loss layer. Public money that takes the earliest, riskiest exposure at 2% can make the same borrower bankable to a commercial lender later, once a repayment record exists. That is the quiet function of concessional capital.

The danger is that cheap money crowds out the discipline it is meant to seed. If borrowers treat a 2% collateral-free loan as a grant, recovery falls and the N$257 million tranche shrinks with every write-off, leaving less for the cohort behind them.

Concessional capital works only if it is repaid; a subsidy is not a gift.

For a development financier or a private lender weighing the youth market, the fund marks where public capital is willing to stand first and cheapest. The decision it puts forward is whether to build on that first-loss layer with follow-on finance that prices risk honestly, or to let a 2% book run without the recovery discipline that keeps it lending past its first N$500 million.

Sources: The Namibian; National Youth Development Fund (NYDF) – DBN; N$257m youth fund kicks off with 42 projects (The Namibian)