The Development Bank of Nigeria (DBN), has started its lending activities to Micro, Small and Medium Enterprises (MSMEs) valued at over N5 billion.
This initial facility will be available to over 20,000 Micro, Small and Medium Scale Enterprises (MSMEs) through three Microfinance institutions.
The Managing Director of DBN, Tony Okpanachi, said:
- The DBN loan repayment tenure is flexible (up to 10 years with a moratorium period of up to 18 months) and the pricing is pragmatic and referenced to market rates.
- On the applicable interest rates, the rates will be bench-marked against the current macroeconomic rates, so as the macroeconomic situation improves and the rates are going down, our rates too will go down unlike when we come out with fix rates irrespective of whatever the macroeconomic situation is.
- The bank’s intervention will come on a systematic basis, it will begin to bring down interest rates, not the kind where you come in and announce an interest rate that is not sustainable. One thing for us is long term sustainability of the businesses.
- A lot of the issues MSMEs have, arose because the funds are always short term funds, but the funds the DBN will provide will ensure that it will influence the rates to be much more lower than what they are getting now.
- The bank is going to provide those funding in such a way that will reflect the macroeconomic environment, such that when macroeconomics go down of course interest rates will go down as well.
- In crafting DBN, lessons were learnt from the past experiences of Development Finance Institutions (DFIs) over the last 50 years. The idea behind DBN is to have an institution that will be self sustaining so that eventually, it can go to the market, both local and international to raise funds and continue its business. The issue of subsidy which is not sustainable is not part of the business model.
- The credit facility to MSMEs will be channeled through three Participating Financial Institutions, all of who are National Micro Finance Institutions with coverage all over the nation: they are: Fortis Microfinance Bank Plc; LAPO Microfinance Bank Ltd and NPF Microfinance Bank Plc.
Okpanachi stated that “the Nigerian economy is powered by the MSMEs, however unstructured. The activities within this segment account for over 50% of Nigeria’s GDP. However, less than 5% 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.
“It is against this context that the DBN loan will provide sustainable financing to Nigeria’s burgeoning MSME segment.”
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