With over N734 billion in loans disbursed to more than 405,000 Micro Small and Medium Enterprises (MSMEs), the Development Bank of Nigeria (DBN) has continued to support smaller businesses to do well and perform their critical role of creating wealth and lifting poverty.
According to official figures, 67% of those loans were disbursed to women-owned businesses, and 24% to enterprises owned by the youth.
The economic impact -within six years of the bank’s existence – has been over 900,000 jobs created and a huge multiplier effect in boosting economic activity, and helping to reduce poverty.
But beyond financing, DBN is now urging MSMEs to quickly embrace technology. This is particularly because recent developments have shown that mere financing is no longer enough to optimize their business operations, drive growth and drive economic development.
There is also the dramatic changing global business landscape which, more than ever, requires industries, business models and processes to transform through the adoption of new digital technologies.
Although digital transformation has become a big challenge for MSMEs in readapting strategies, some businesses have achieved exponential growth by automating their processes through it.
A study in Turkey, for instance, shows how 41.2% of 131 SMEs which underwent technological innovations saw their operational efficiency leap 96.9%.
Discussions at the DBN’s 4th Annual lecture series, therefore, focused on strategies to support MSMEs to technologically innovate and become relevant in today’s local and global space.
The lecture held in Abuja with the theme, “A DIGITAL NIGERIA: Leveraging Technology to Improve Ease of Doing Business for MSMEs”, had experts and stakeholders assert how MSME sector remains pivotal for national economic growth, and job creation.
Set up by the federal government in 2017 in partnership with some International Finance Institutions, DBN provides medium to long-term financing for Nigeria’s MSMEs, and according to Vice President, Kashim Shettima its “achievements are significant and far-reaching.”
From financing to capacity building and mentorship, the bank’s focus on MSMEs, which account for over 90% of all businesses in the country and employ more than 80% of the workforce, has been critical.
“DBN continues to play a pivotal role in supporting the growth and development of the Nigerian economy, through continued commitment to empower local businesses,” VP Shettima noted.
Beyond lending activities, the bank, which is the country’s foremost Wholesale Development Finance Institution, has also played a leading role in promoting financial inclusion, having developed innovative financial products and services tailored to the needs of underserved communities.
Shettima said this has helped to bring more Nigerians into the formal financial system and boost economic activities.
By leveraging technology within their operations, MSMEs can improve efficiency, which has become a major impediment to doing business in the country.
“DBN is committed to actively supporting MSMEs in adopting digital technologies through our financing initiatives and capacity-building programs. We believe that by embracing technology, we can unlock the full potential of Nigeria’s entrepreneurial spirit and propel our economy towards sustainable growth and prosperity,” Shehu Yahaya, Chairman, DBN noted.
Ease of Doing Business (EODB) is widely seen as a critical determinant of a nation’s economic competitiveness and attractiveness to foreign investment, while technology has emerged as a powerful catalyst for its enhancement. Yet, Nigeria, Africa’s largest economy, currently ranks 131 out of 190 global economies on the World Bank’s latest ease of doing business annual ratings.
In addition to businesses, countries that have embraced technology have experienced great advantages, leading to better business conditions and overall economic success. Take Estonia, for example, a trailblazer in e-governance. The nation has successfully become a digital society, with more than 99% of government services accessible online. This shift has not only lessened administrative hassles but has also given a considerable boost to business productivity.
Another example is Singapore, known for its digital infrastructure and innovation, and consistently ranks among the top countries in the World Bank’s EODB report.
But the journey towards a Digital Nigeria goes beyond government, and requires collaboration between the public and private sectors.
Government-owned institutions must create an enabling policy environment that encourages innovation and invests in digital infrastructure. On the other hand, the private sector, particularly technology companies, must develop and deploy innovative solutions tailored to the needs of Nigerian businesses.
Tola Adeyemi, Senior Partner, KPMG in Nigeria and CEO KPMG West Africa just recently highlighted how ease of doing business has become a big constraint to Nigeria’s growth prospects and the realization of projections captured in this year’s N28.777 trillion budget.
“We need to push growth in Nigeria, we’ve got to bring in more foreign investments, make the environment suitable for businesses that are operating in the country,” he stated.
Kashifu Abdullahi, Director-General of the National Information Technology Development Agency (NITDA), who spoke on the theme of the lecture, agrees on the importance of digitalization in driving sustainable economic growth and enhancing the ease of doing business for MSMEs.
“MSMEs that have embraced digitalization and technology tend to fare better.”
Highlighting the significance of these small businesses. Abdullahi assured of inclusivity in access to digital infrastructure. Government will provide an easy online business registration process, and is also concluding a legal framework that will enable investments in digital public infrastructure and make it a lot easier for SMEs while helping to automate governance, he added.
Digital transformation further reduces transaction costs and helps small businesses become more flexible, faster and find new opportunities to generate income.
However, those that resist technological advancements risk limitations in terms of scalability, market reach, operational efficiency, profitability and competitiveness.
“Digitalization is key to enhancing the performance of MSMEs. Clearly, DBN is poised to enhance its support to micro small, and medium enterprises, creating technology and innovation to grow this market segment on a sustainable basis,” Zainab Ahmed, Nigeria’s former minister of Finance, Budget and National planning stressed.
For Tony Okpanachi, who is DBN’s Managing Director/CEO, the transformative impact of the internet on human interaction and commerce, cannot be overemphasized.
Social platforms like Facebook, Instagram, LinkedIn and others, which started as a means of interaction between people now attract huge revenues. This is a proof of the enormous marketing opportunity that the Internet, and by extension, technology presents for strong value exchange.
Okpanachi cited the emergence of Open AI’s Chat GPT which crossed the one million user mark in 5 days, becoming the fastest-growing application of all time.
Quoting DataReportal’s report, he regretted Nigeria’s 55.4% internet penetration status as at January 2023. This situation remains a major challenge and has partly seen the country score poorly on the EODB ranking, and presents a strong opportunity for immediate resolution of the risk factors.
“As a key advocate for MSME financing and a driver of sustainable development, DBN recognizes the vital role of technology in Nigeria and will continue to promote solutions that unlock innovative funding for MSMEs, in a way that finances a sustainable future. Similarly, the bank will continue to drive creativity that focuses on improving our position on the Ease of Doing Business (EODB) ranking,” he reassured.
Through its Annual Lecture Series and other platforms, DBN leads conversations on how to drive innovation, resilience, and profitability, particularly for smaller businesses.
Its Techpreneur Summit provides leadership on efficient fund utilization, business process optimization, product-market fit, mentoring, and ultimately, profitability.
“We understand the potential of the IT sector to transform the Nigerian economy, and since 2021, we’ve hosted the annual Techpreneur Summit as a platform to facilitate technopreneurship, enhance their ability to access debt finance and sensitize them on the various types of debt funding available,” Okpanachi added.