By Emma Ujah
Financial institutions including micro-finance banks, MFBs, may have started granting long-term loans, taking a queue from long-tenured funds introduced into the financial sector as on-lending facility by the Development Bank of Nigeria, DBN, in recent years.
Disclosing this in a chat with the media, Managing Director of DBN, Mr. Tony Okpanachi, has described long-term loans the bank is giving to Macro, Small and Medium Enterprises (MSMEs) as a game changer in the sub-sector of the economy.
He stated: “One major challenge of the operators in that area of the economy before we came in was the problem of short-term loans.
“With our coming into the sub-sector with long-term loans, we are now seeing a situation in which even the MFBs are now, not only on-lending our funds to MSMEs on a long-term basis, they are also adding their own funds and lending on much longer terms to the operators.
“Typically, MSMEs used to lend to customers on very tight terms of between six months to one year. But the story is gradually changing as we can now see them moving up between one year to two years and even more, especially given that we give out loans for as long as between five to 10 years.”
DBN, he said, has given in excess of N482 billion to more than 208,000 MSMEs as at the end of 2021.
He added, “The Bank’s profitability has also remained resilient despite the low-interest rate environment and the impact of COVID-19 on the business environment. Profit before tax and profit after tax stood at N18.8 billion and N17.9 billion respectively, translating to return on assets and return on equity of 4% and 11% respectively for 2020 which was our last audited financial period.”
He also stated: “DBN has various products and programs targeted at reducing the rates of loans to MSMEs. For instance, DBN has an interest drawback program for its PFIs through which they grant rebates on DBN loans to MSMEs playing within sustainability sectors such as renewable energy, waste management and others.”