April 23, 2018

DBN will provide 12 yrs loan tenure for SMEs — Okpanachi

DBN will provide 12 yrs loan  tenure for SMEs  — Okpanachi

•Mr. Tony Okpanachi

The 2018 edition Vanguard Economic Discourse featured a panel of leading operators in various spheres of the economy including the Managing Director of Development Bank of Nigeria, DBN, Mr. Tony Okpanachi.
In this interview on the sidelines on the Discourse, Okpanachi spoke on the mandate of the DBN, source of funding and expected impact on growth of SMEs and employment generation in the country.

By Babajide Komolafe & Godfrey Bivbere

YOU spoke about DBN in respect of providing funds for SMEs and explained that in a few months the procedures will be rolled out, can you provide further insight on this?

What I said is that because we are a wholesale institution, we have to work through financial institutions like microfinance banks, commercial banks and other financial institutions who lend to that segment of the economy.

So what we are doing now is that we are on-boarding several of them. So in a few months time,  like in a couple of weeks, we will announce the banks that we have signed on board, so that these businesses can go to them to access DBN funds.

What mechanism are you putting in place to ensure this fund can be easily accessed by SMEs and thus avoid repeat of similar efforts?  For example there is the $220 billion MSME Fund by the Central Bank of Nigeria, CBN; some have been able to access while many have not been able to access?

As part of our engagement with the financial institutions we found out that we need to create a solution that will be a win-win for everybody. Now we have to get the financial institutions interested in the funds, it has to make sense to them. In terms of, can they leverage on it, is it profitable to them to borrow from us and then lend? We took that into consideration.

Secondly, do we provide them that flexibility in terms of tenure, do we provide them long term tenure for them to be able to lend for long term tenure which is not currently in the market. Thirdly, when they have the funding and the issue is not the funding but they want to share risk, are we able to share the risk with them so that they are encouraged to be able to take on the risk of that segment of the economy. All these we are putting together to ensure that we reach out.

The fourth thing is to ensure that we are not just providing lines to the financial institutions but we are providing lines for them for onward lending. So we also want to see the customers they are going to lend to, so as we provide for them, and ensure the fund eventual gets to the customers and not for the financial institutions to hold on to.

When you say long term, what is your horizon?

The horizon for us is that we provide funds for up to 10 years in terms of actual repayment period but when necessary we also provide a moratorium of another 18 months. So effectively we will be talking about almost 12 years tenure which is a very long tenure in this market.

So for us, that is quite good for small businesses to enable them stabilise their businesses to be able to repay with ease.

How soon will small businesses begin to enjoy the impact of DBN?

What I will advise is that small businesses should begin to engage their financial institutions. It is our plan that before the end of the year, the commercial banks, and the financial institutions that meet our legitimate criteria would be signed on. So once they sign up, once the banks do the credit analysis and they are comfortable with them, they come to DBN and DBN will provide the funding.

Do you have adequate funding?

The volume we have now will take us quite some time and the way we position DBN,  when we require more funding, we can raise  it.

What about funding from international sources?

Most or a lot our funding is coming from international partners like you are aware. You have the World Bank, African Development Bank, the Germany Development Bank, French Development Bank, European Investment Bank. All these international funders are already funding DBN and they are all willing to fund more as long as we can demonstrate good performance.

No need for more government funding?

Well, government is participating because most of the funding that are coming in is coming in through government participation. The international funders provide the funds through the government, so government is participating and therefore is a major stakeholder in it.

What incentives does the DBN have for Nigerians based abroad wishing to return back home to invest?

We are not specific about Nigerians in Diaspora coming back to do business. We are talking about small businesses generally and like I said during my presentation, those businesses at the starting point; you either approach your financial institution and when they shy away from start-up capital, DBN is willing to provide funding through those participating financial institutions.

That is one. Two, usually most businesses start with equity and most equities are gotten from different sources, usually from families and friends and other sources.