DBN commences long-term MSME lending

…Signs N5 b deal with 3 MFBs

by Emma Ujah, Abuja Bureau Chief

The Development Bank of Nigeria (DBN) Monday, commenced long-term lending to Micro, Small , Medium and Enterprises, (MSMEs) as it signed a N5 billion partnership deal with three Micro Finance Banks (MFBs).

According to the Managing Director (MD) of the bank, Mr. Tony Okpanachi, “DBN loan repayment tenure is flexible (up to 10 years with a moratorium period of up to 18 months) and the pricing pragmatic and referenced to market rates.”

The first three Participating Financial Institutions (PFIs) with which DBN entered the deal, in Abuja, were: Fortis, LAPO and NPF Microfinance Banks.

Mr. Okpanachi said that past DFIs had been taken into account and that as such, the Business Model adopted by the new development finance institution would ensure its sustainability, unlike its predecessors which failed to deliver on their mandates.

He noted that the nation’s economy was powered by MSMEs, though unstructured and had faced immense financing challenges, which his organization would address, head-on.

His words, “The activities within this segment account for over 50 per cent of Nigeria’s GDP. However, less than 5 per cent of these businesses have access to credit in the financial system.
“Statistics show that there are over 37 million MSMEs in Nigeria. However, regardless of the number,
many of these businesses still struggle with access to adequate financing.

“with an increasing educated demography graduating from tertiary educational institutions, coming home to meet limited vacancies in the job market, and a corresponding number in the Diaspora returning to Nigeria to create value, solve problems and start businesses, the time for DBN is now. Existing financing options are inadequate to address the demands of the segment.”

The DBN boss said that the long-term nature of its facilities; Partial Credit Guarantee and capacity building would combine to drastically reduce the risk of lending to the MSMEs, thereby making it more attractive to financial institutions to participate and reduce the pricing of the it loans.

The pricing of its loans, he said, would be benchmarked against the Treasury Bills and Bonds rate, depending on the tenure of each.

Mr. Okpanachi added that DBN would be grown to become self-sustaining and would source funds from both domestic and international capital market and operate like similar DFIs in countries such Malaysia, India and China and Turkey.

Mr. Okpanachi disclosed that unlike other DFIs , DBN would not be sector specific and would therefore make its funds available to all players in the MSMEs.

“DBN loan cuts across all sectors. It seeks to achieve the Nigerian Sustainable Banking Principles of the Central Bank of Nigeria , where financial inclusion ranks high . as well as, the United Nations Sustainable Development Goals and it’s in line with the economic Recovery and Growth Plan of the federal government, ” Mr. Okpanachi said.

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