By Joseph INOKOTONG
The much awaited Development Bank of Nigeria (DBN), has commenced operations with $1.3 billion (N398.45 billion: N306.5/$1) take-off capital, after over two years of delay.
The take off, of DBN following the approval of its operating license by the Central Bank of Nigeria (CBN), though cheering, has raised concern about its ability to meet the demands of about 70,000 Micro, Small and Medium Enterprises (MSMEs), seeking various forms of financial intervention to take their businesses to higher levels.
Also, the DBN would have to battle with a growing market of small businesses, many of which are unstructured and seek access to finance at single-digit interest rates.
The DBN is jointly funded by the World Bank (WB), KfW (German Development Bank), the African Development Bank (AfDB) and the Agence Française de Development (French Development Agency), and it is also finalising agreements with the European Investment Bank (EIB) for more investment.
Managing Director of the newly-licensed DBN, Tony Okpanachi told reporters in Abuja at its unveiling that it will finance 20,000 MSMEs in the first year of its operation.
He said part of the strategies of the bank was to de-risk 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, the loans would be given at a competitive rate in order to promote the development of the sector.
The Managing Director said: “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.”
He pointed out that the bank would not be dealing directly with individuals, but rather through their conventional bankers like microfinance and commercial banks.
The Minister of Finance, Mrs. Kemi Adeosun explained that the DBN operations will provide loans with political interference, 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.
“The operations of the DBN are distinct from other development banks as it is focused on supporting small businesses defined by size and not by sectors.
“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.
“As the economy diversifies, the growth of the MSME sector will have a positive impact on the economy through employment generation, wealth creation and economic growth”.