Development Bank of Nigeria (DBN) Takes Off With $1.3B Loan From World Bank, ADB, Germany’s Kfw

by Bamidele Ogunberu Last updated on April 15th, 2017,

Development Bank of Nigeria (DBN) Takes Off With $1.3B Loan From World Bank, ADB, Germany’s Kfw. The Central Bank of Nigeria (CBN) has issued license to the Development Bank of Nigeria (DBN) of the Federal Ministry of Finance.

The licence granted DBN is for a Wholesale Development Finance Institution with national authorization. The bank aims to support small-scale businesses with loans of varying lengths at lower interest rates than currently available as the country contends with its first recession in 25 years.

According to the Minister of Finance, Mrs Kemi Adeosun, the DBN which set to kick off operations is being positioned to galvanise the Micro Small‎ Medium Enterprises (MSME) for the overall development of the nation’s economy. Adeosun said approval for the licence was subject to meeting the minimum capital requirement of N100 billion ($326 million), the reconstitution of the bank’s board and a review of the organisation’s structure.

The development bank has $1.3 billion in seed money provided by the World Bank, African Development Bank and German state bank Kfw, the finance ministry said on its Twitter feed.

“The government expects that 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”, she said.

The ministry has previously said that 50 percent of the GDP in Africa’s largest economy is made up of small companies.

DBN was conceived to be a robust private-sector led financing for small businesses.  As a wholesale bank, the DBN will lend wholesale to Microfinance Banks which will on-lend    medium to long-term loans to MSMEs. The MSMEs contribute about 48.47 percent to the Gross Domestic Products (GDP) of Nigeria but have access to only about 5 percent of lending from Deposit Money Banks (DMBs).

Technical partners on DBN include; World Bank, African Development Bank, Agence Française de Développement (AFD) and KfW of Germany.

DBN will have access to US$1.3bn (N396.5 billion) which has been jointly provided by the World Bank (WB), KfW (German Development Bank), the African Development Bank (AfDB) and the Agence Française de Development (French Development Agency).

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).

DBN will make facilities of up to 10 years tenor including a moratorium period of 18 months available to MSMEs and entrepreneurs for the first time

Also commenting, Mr. Tony Okpanachi, the Managing Director/CEO of DBN said “with DBN, it’s a new dawn for small businesses because we are focused on financing the MSMES in a sustainable way to add value to the economy. The impact on economy has to come from the impact of small businesses.”

The DBN MD said he was planning to empower some 20,000 micro, small and medium scale enterprises (MSMEs) in the first one year of existence.

He also indicated that DBN will make impact in four areas. “We will make impact in four areas: the borrowers: we will create financial inclusion as they access funds. Secondly, we will create jobs as we empower the small businesses. Thirdly, we are looking at female participation so women can access the funds and we will build capacity for the small businesses. We will also be able to create revenue for the participating financial institutions and be able to build capacity for them as well,” he said.

On the risk of lending he said “we will also moderate the risk, de-risk some sectors and come up with a credit guarantee scheme where we will guarantee up to 50 percent of the credit” to encourage lending to small businesses.

“Government will also benefit from taxes as more businesses are successful. The multiplier effect on the economy will put Nigeria on sustainable growth path,” he noted.

On the lending rate, he said it will be determined when they start lending but that it will be competitive. He maintained that women may get preferential access.

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