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DBN unveils credit strategy, seeks financial input from European Investment Bank (EIB)
Managing Director of Development Bank of Nigeria (DBN), Tony Okpanachi, has opened up on the loan delivery strategy the bank will use to grow Small and medium Enterprises (SMEs) within the first two years.
This is the new bank which kicked off with N398.45billion is still talking with the European Investment Bank (EIB) for more investment.
By design, the bank came with a definite mandate which centered round the encouragement of growth of the informal sector through financing of projects, particularly the medium, small and medium scale industries.
Already, some of the institutions that rallied the initial fund for the bank include the World Bank (WB), KfW (German Development Bank), the African Development Bank (AfDB) and the Agence Française de Development (French Development Agency).
Okpanachi assured that it will finance 20,000 micro, small and medium enterprises (SMEs) in the first year of its operation using a tailored made strategy that is driven de-risking the sector by making sure that loans were provided at a longer period of 10 years with a moratorium that would enable the loans to be repaid within 12 years.
According to him, loans would be given at a competitive rate, adding that this would be used to promote the development of the sector.
The managing director averred that “DBN is a new dawn for MSMEs because we will provide small businesses with funds and this will create the needed impact on the economy”.
“We will create a sustainable finding model and also ensure financial inclusion through access to funding.
“We are also looking at more female participation and about 20,000 SMEs will be funded in the first year of our operation.”
Another new strategy to be deployed by the bank is to be dealing directly with conventional bankers like microfinance and commercial banks where the loan requesting individuals had been well known and confirmed fit for facility access.
According to the Minister of Finance, Mrs. Kemi Adeosun, 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).
Considering the fears of finance experts on the dangers of role duplication and related confusion, Adeosun explained that the number of financial institutions that will work with DBN as participating financial institutions will be banks that meet up with a full set of eligibility requirements will be qualified to receive funds from the bank. She was however quick to note that the operations of the DBN will not in any way, result in the elimination of the Bank of Industry (BoI), Bank of Agriculture (BOA) or any other existing development financial institution.
Business Hilights recalls that banking pundits had raised objection on the repealing of BoI Act in order to set up the DBN.
But addressing the concerns, Adeosun said: “The operations of the DBN is distinct from 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 and important financing gap.
“The influx of additional capital from the DBN will lower borrowing rates and the longer tenure of the loans, will provide the required flexibility in the management of cash flows, giving businesses the opportunity to make capital improvements and acquire equipment or supplies.