In this interview, Managing Director, Development Bank of Nigeria (DBN), Mr. Tony Okpanachi, indicated that long-term capital is no longer a hindrance to MSMEs in the country.
By Emma Ujah, Abuja Bureau Chief
TO what extent has MSMEs benefited from DBN so far
You will recall, November last year we started our learning activities with three microfinance institutions. We have made available to them almost N5 billion. This was supposed to be for several MSMEs. Since we are a wholesale institution we work through financial
institutions, so when they come we make a line available to them so as they come with their clients we draw-down on the line.
Beyond that, we have started bringing on board some commercial banks which you can see on our website. We have also made credit lines available to them. So as they come, we draw down the line. But I’m glad to tell you that we have nine currently on our list, both commercial and microfinance banks –and between now and the end of June we expect more commercial banks.
Can you give us an update about your visit to the UK, when European Investment Bank and Islamic Development Bank were to take up their investments?
We have equity shareholders coming in, that is African Development Bank and the European Bank. They have invested $50 million and $20 million respectively.
As we speak, effectively they have funded the investment in the DBN. So they are now shareholders in the DBN.
The $50 million from AfDB and European Bank are already in the system so now the bank is owned by the federal government, NSIA, AfDB and European Investment Bank.
What are the mechanisms put in place to ensure that the proposals of the micro finance banks meet the criteria?
For us, we receive the exact request, check the tenure and the terms and conditions offered before we disburse. We disburse for on-lending not for the banks to hold on to. We have a mechanism within our system that ensures that the funds hits the account of the end-borrowers within 72 hours. Beyond that, we follow up on them to see the impact made by the borrowing.
For example, we check if it had created more employment, has it increased turnover, has it increased revenue or enabled them pay more taxes
when necessary? We look out for all of these. We don’t just create the lines for the banks alone.
Do you have uniform interest for borrowers?
No. It depends on the risk profile of the institution. It is not flat for everybody. It is based on assessment. Knowing that we take the risk of the financial institutions, we assess them and rate them, so that brings about the risk premium for each of them.
In your model, you talked about risk sharing, have you started that?
We have not started that, though we have obtained the regulatory approval to set it up. It is going to be a subsidiary of the DBN and we have started working with the World Bank to get the consultant to put the structure in place. It is our projection that towards the end of this year or early next year, the credit guaranty should come on board.
How far have you gone with de-risking the industry and providing capacity to PFIs?
That is also on-going. If you recall that we have a unit with the ministry called the project implementation unit, the idea is to have a different unit handling the capacity building issues so that we are not distracted from the core mandate of lending and they have sent out RFPs expression of interest for consultants to come in and the process is on-going. The next stage is to ensure that the consultants are short-listed and we identify which PFIs need this capacity building and allocate consultants to them. In the process of appraising the PFIs, some of them that do not meet our criteria, we identify ways we can help them, that’s where the technical assistance comes in. for example if it is lack of a strong SME desk that is the problem, we give assistance.
The idea is that even if a firm does not qualify today, we work with them to make them qualify. The overall objective is to create more access to credit for the SMEs.
How are you thinking of helping the young graduates who may want to start up, knowing that they may not be able to meet collateral criteria of banks?
Part of what we are doing differently is that we are ready to help start-ups. This capacity building we are telling the financial institution that once a project comes and they assess it to be bankable, we are ready to take up the risk with them to give funding for start-ups.
Subsequently, we are going to come up with products that we are going to sell through these financial institutions for such institutions that will, again, sell them down the line. For now we want the buy-in of the financial institutions themselves so that we tell them the fund is available for them and we are willing to fund start-ups.
We build that confidence in them and subsequently we go out with our products directly to say help us sell these products to these people but that will be in phases.
We are very much available to help start-ups. We will also share risk with them. The overall objective is to make funding easy to them.
At your maiden interface with the media where you were unveiled, I recall you said you are targeting 20,000 MSMEs in the first year. You are about a year now; do you think you are meeting the target?
We are working towards meeting the target. Remember, I said our first year of full operations. DBN is a start-up and there is a process to start up. But now we have a full house so we will start from this year. We now have full operations in place. We were licensed on 29th March 2017. The process for setting up the structures took some time. Also because we are a wholesale bank, we will partner with financial institutions and that means we will have to bring them onboard to lend to them. I can assure you we are on course.
So far how many MSMEs have benefited?
So far, the request from the PFIs for MSMEs is beyond 500. As they make requests and meet the conditions, we fund them.
How simple is the processes of accessing these loans by the MSMEs?
That is the engagement that is going on with the PFIs. The PFIs do the credit appraisal which we can’t get involved. But when it gets to the DBN side, unlike other institutions, it’s with speed. In terms of interfacing with customers directly, we won’t do, the banks will do that. We are already thinking of products to address start-ups, to address women and others, with specific features, we will still engage the PFIs to bring their clients to access the products. Ultimately, we want to collaborate with the commercial banks and the micro finance banks so the reach will be everywhere. There would be serious awareness campaigns.
How are you engaging institutions involved in MSMEs development?
We are currently working with SMEDAN. We have technical committees from their end and our end. They have clusters around the geopolitical zones. We want to key into those clusters to help build capacity for the MSMEs. We notice the MSMEs lack certain capacities so we want to start teaching the MSMEs on a case by case basis. We hope that everyone who is interested in expanding their businesses should learn the basics of doing so. They were here a couple of weeks ago and we have been talking.
Beyond SMEDAN, we also know we need to collaborate with a lot of intuitions – the National Association of Small and Medium Enterprises (NASME) for instance, we need to engage them. There are so many partnerships we are going into. We have to work in collaboration. Other DFIS have been working in silos but that hasn’t worked well, so we are coming with a collaborative approach to ensure that all the institutions playing key roles work together. The idea is to take leadership to ensure that MSMEs have easy access to funds.
You also signed an agreement with NIRSAL, can you tell us more about it?
The objective is to finance the agriculture value-chain. Our objective in that respect is how to make it easy for PFIs to fund the agric segment because it is a priority sector for the economy. How do we unleash the potentials in the agric space and get the PFIs interested? How do we make it easier for PFIs to get the comfort to lend to agriculture and we also have the comfort to on-lend to them for agric businesses.