Nigeria’s wholesale Development Bank (DBN) would, before the first quarter of next year, commence a credit guarantee scheme that would allow it give some comfort to commercial lenders to provide long term money to the Medium Small and Micro enterprises in the country.
The World Bank is already collaborating with the Development bank on the risk guarantee model and according to Tony Okpanachi, DBN Managing Director, the bank plans to provide up to 50 percent partial guarantees for financial institutions who want to lend to MSMEs.
“We have gotten the regulation approval to set it up, it going to be a subsidiary of the development bank of Nigeria and we have started working with World Bank to get the consultant, put the structure in place.
It is our projection that towards the end of the year or early next year the credit guarantee should come on board,” Okpanachi said in an interview in Abuja.
The DBN commenced operations in March, 2017 as a Wholesale Development Finance Institution to provide sustainable financing to MSMEs, through eligible financial institutions.
The bank which targets to promote growth and sustainability commenced actual disbursements in October, 2017, with some N5 billion, long term money to over 20,000 Micro, Small and Medium Enterprises (MSMEs).
Giving a progress report on the bank’s operations after one year, Okpanachi said, “…Recall, 1st of November last year we started our lending activities with 3 microfinance institutions. We have made available to them N4.9 billion, for several SMEs, so as they bring their clients on board, we sign.
“Beyond that we have started bringing on board some commercial banks, we have also made lines available to them. But I’m glad to tell you that we have almost nine institutions currently on our list both commercial and micro banks, and between now and the end of June we expect more commercial banks,” he stated.
Okpanachi explained that the bank’s rates cannot be as cheap as expected because, according to him, the sustainability of the bank as a long-term, self-sustaining, private sector-led institution is quite critical.
Speaking on simplifying the bank’s loan processes to enable more MSMEs access the funds, Okpanachi informed that they engaging the Participating Financial Institutions on the matter.
“There is an engagement going on with the PFIs. The PFIs do the credit appraisal which we can’t get involved. But when it gets to the DBN side, unlike other institutions, it’s with speed,” he stated.
“The banks will interface with the customers directly,” he clarified, adding, that they are already working out products to address start-ups, women and others categories with specific features.
“We will still engage the PFIs to bring the clients to access the products. Ultimately, we want to collaborate with the commercial banks and the micro finance banks so the reach will be everywhere. There would be serious campaigns so a lot of Nigerians are aware.
On the mechanisms put in place to ensure that the proposals of the micro finance bank meet specified criteria, he explained, “For us, we receive the exact request, check the tenure and the terms of condition offered before we disburse.”
According to him, the DBN has a mechanism that ensures that the funds hit the account of the end borrowers within 72 hours. “Beyond that, we follow up on them to see the impact made by the borrowing.
“For example, we check if it had created more employment, has it increased turnover, has it increased revenue to enable them pay more taxes when necessary, we look out for all of these.
So we don’t just create the lines for the banks alone,” he stated.
Okpanachi also noted that the bank is collaborating with the other institutions like the Small and Medium Enterprises Development Agency of Nigeria as well as the National Association of Small and Medium Enterprises (NASME) to create an efficient ecosystem that would deliver set goals to the Nigeria’s small businesses.
