The Central Bank of Nigeria, CBN recently licenced Development Bank of Nigeria, DBN. The mode of operations of the bank are clearly distinct from those of other development banks, as it is focused on supporting micro, small and medium enterprises, MSMEs. The bank is set to take-off with 20,000 MSMEs, which it would advance loans on medium and long-term through micro-finance banks.
By OLAJIDE FABAMISE, Lagos
With the approval of operational license for the Development Bank of Nigeria (DBN), stakeholders have said that the bank would serve as a wholesale bank to micro-finance banks (MfBs) which would lend on medium and long-term loans to micro, small and medium enterprises (MSMEs). Recently, the Central Bank of Nigeria (CBN) approved the application for an operational license for the DBN to begin operations. The approval conveyed in a letter and addressed to the managing director/chief executive officer of the DBN, was signed by the deputy governor, Financial System Stability, CBN, Dr. Okwu Nnanna.
Minister of Finance, Mrs. Kemi Adeosun, confirmed the approval of the bank, adding that the approval was subject to meeting the minimum capital requirement of N100bn, as well as the reconstitution of the board of the bank and reviewing its organogram.
According to the managing director of the bank, Mr. Tony Okpanachi, the bank is set to take-off with 20,000 micro, small and medium-scale enterprises (MSMSEs). According to him, the bank which has earmarked N1.3bn as take-off fund would be a whole-sale bank that would lend directly to the money deposit banks and micro-finance banks who would, in turn, lend to MSMSEs.
“The coming up of the bank signals a new dawn for MSMSEs. We should be able to provide long-term funds between 10 to 12 years to enable the businesses grow. Whatever we do, without MSMSEs, we cannot achieve anything.
“We will partner with participating financial institutions (PFIs) to reach micro-finance banks (MfBs) across the country who will be lending the money to MSMSEs.”
He added that the bank would introduce sustainable models, build up capacity and source for funds.
“We are focused on financing MSMSEs, creating risk guarantee up to 50 per cent to ensure growth in the economy.”
He assured that the bank would engender mechanisms to moderate risks by ensuring adequate funding for capacity training for participating financial institutions.
“When this is done, it will create jobs, increase tax and revenue generation for government. The operations of the DBN are clearly distinct from [that of other] other development banks, as it is focused on supporting small businesses defined by size and not by sectors.
“The DBN will provide loans to all sectors of the economy, including; manufacturing, services and other industries not currently served by existing development banks, thereby filling an important gap in the provision of finance to micro, small and medium enterprises (MSMEs).”
Chief Executive Officer, Shoespeed Inter-global Services Limited, Mr. Abiodun Folawiyo, disclosed to LEADERSHIP Weekend that the Bank of Industry (BoI) needed experts in different sectors who understand the business environment to help serve MSMEs better.
“The BoI does not understand the practical challenges we have in our various sectors. As a shoe-maker, if I want a loan from BoI and I tell a BoI official that I want to bring in machine from Italy at the cost of N60m to scale-up my business, the question he will ask is ‘where is your collateral?’. But, what I expect such official to talk about is, ‘can you give us the link or the contact of the company, so that we can talk to the manufacturer to know what quantity of the machine they can produce per day and what the cost of maintenance is?’ That is the only way they can know how realistic what I am talking about is.
“So, the BoI’s rule that all businesses must always meet a particular criterion of collateral may not be proper. If the DBN must work, they must get experts on investment techniques who understand how different sectors work and not just financial managers alone.”
speaking, an entrepreneur and CEO of Moin Moin Expresso, Anthea Peteru, said though the BoI was doing a great job, it has, so far, been unable to reach those at the grassroots effectively; hence the establishment of the DBN to fill the that gap.
“The BoI has empowered a lot of entrepreneurs, but there should be a way through which they can reach those at the grassroots. They should find a way to give concessions to those in the rural areas who may not know how to write a business plan but have thriving businesses.
“If the new Development Bank can find a way of developing people at the grassroots, it will help [out] a great deal. For some of them, if they can get little financial assistance, it will give their businesses a boost and, by that, we are growing the micro sector and the problem of hunger and poverty in the rural areas will be reduced,” Peteru said.
According to experts, though the main focus of the DBN is MSMEs, the bank, which is a whole-sale one, would lend money to micro-finance banks which would, in turn lend on medium to long-term to MSMEs.
The director-general, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, in a telephone conversation with LEADERSHIP Weekend, said that the bank would have a positive effect on the economy by supplementing different DFIs, with the BoI and the Nigerian Export and Import (NEXIM) Bank, being some examples.
Yusuf tasked the new bank’s administration to deal with the bank well, so that its targets would be accomplished.
“It is a decent advancement and more is always better. The thought is to benefit the micro, small and medium enterprises (MSMEs).
“Since it has been made and authorised, we trust that it is effectively overseen, so that it can supplement the other advancement of budgetary establishment,” he said.
The chairman, Manufacturers Association of Nigeria (MAN), Otta branch, Mr. Wale Adegbite, also recognised the foundation of the DBN, saying it would boost the chances of individual operators to get loans.
According to Adegbite, the current DFIs do not possess the capacity to serve his members for loans, a component that had been thwarting the development of the industry.
As indicated by him, the foundation of DBN would take into account competition among the DFIs in addressing the requirements of clients.
The director-general, Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), Dr. Umaru Dikko, stated that the establishment of the DBN would provide loans to all sectors of the economy, including manufacturing, services and other industries not currently served by existing development banks, thereby filling an important gap in the provision of finance to MSMEs.
“As a whole-sale bank, the DBN will lend whole-sale to micro-finance banks, which will on-lend to medium to long-term loans to MSMEs.”
Also, Dikko reaffirmed that MSMEs contributed about 48.47 per cent to Nigeria’s Gross Domestic Products (GDP), but have access to only about five per cent of lending from deposit money banks (DMBs).