DBN in plans to set up credit guarantee company

Tony Okpanachi, managing director, DBN

The Development Bank of Nigeria (DBN) is working on setting up a company that will provide credit guarantee and provide capacity building or technical assistance to financial institutions.

The move is to encourage financial institutions to lend to Micro, Small and Medium Enterprises (MSMEs) which are the engine of any economy.

This formed part of the discussions of DBN with the World Bank at the just concluded 2019 World Bank/IMF Spring meetings in Washington D.C,

Acting on its role as a wholesale development finance institution (DFI) to provide sustainable financing to MSME for the development of that segment, through eligible Participating Financial Institutions (PFIs), DBN has from the scratch disbursed a total of N31 billion to this sector.

Tony Okpanachi, managing director/CEO, who spoke to journalists on the sideline of the Spring meetings said the World  Bank, being a strong partner has been supporting the DBN, providing $500 million for the bank.

“DBN is a unique model of a development finance institution which is a wholesale finance institution. The last two years have been exciting for us we started from scratch and we have been able to do N31 billion in terms of loans in different sectors of the economy and have reached 5000 end borrowers through the financial institutions we deal with”, he said.

He explained that the bank has three core mandates, first is lending through commercial institutions, second is providing credit guarantee for MSMEs to encourage banks to lend to them.

“We are working on setting up a company that will provide credit guarantee and provide capacity building or technical assistance to financial institutions to encourage them to be able to lend to MSMEs which are the engine of any economy so we will discuss what we have been doing and see the areas open for collaboration”.

Having been part of the series of meetings with the World Bank, one might think that the essence of such meetings was to raise funds from the World Bank but Okpanachi said, “We are not here to raise money, when you take money from people, you have to give account to them on what you have done with the money. What we are doing now is to review what we have done so far with the money we have received and what plans we have to deploy the remaining money”.

According to him, one of the major problems that MSMEs have is collateral and especially when it has to be fixed like using houses. “With the moveable assets, as collateral, it is an encouragement for banks to lend and even as DBN, we have been encouraging the financial institutions we work with to accept those moveable assets as securities to enable them lend to these businesses. So even when they are to provide securities to us, we also encourage them to bring such securities”.

“At the moment, we have 29 financial institutions on board with us, made up of commercial banks, we are now telling the public that you have options of which bank to go to, they are all listed on our website”.

“The process is simple, go to your bank and ask for a DBN loan, once you meet the eligibility criteria with your bank, the bank comes to us with your agreement. 80% of the loans we gave out last year were to customers of microfinance banks; they come in large numbers even though they ask for small amounts”.

“DBN encourages longer tenure funding, the idea is that growing businesses need longer tenures for their businesses to stablise before they start paying back. We are not sector specific unlike other DFIs. For micro businesses, the maximum loan is N10 million, from the small and medium businesses go up to N150 million and we have a program for small corporates where they can take up to N600 million”.


Hope Moses-Ashike

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