MD/CEO of Development Bank of Nigeria Plc, Tony Okpanachi |
The federal government’s development banking institution
saddled with the mandate of addressing the major financing challenges facing
micro, small and medium scale enterprises (MSMEs) in Nigeria, has launched the
DBN Finance to Finance (F2F) Product, the DBN Non-Interest Banking Product and
the DBN Long-Term Product.
This will further address the existing access to finance
challenges facing MSMEs in the country, which has been exacerbated by the
effects of the coronavirus disease (COVID-19) pandemic.
Prior to the outbreak of the COVID-19 pandemic, the funding
gap in the MSMEs sector in Nigeria was a whopping N48 trillion, according to
Godwin Emefiele, the Governor of Central Bank of Nigeria (CBN).
This frightening reality constantly drives DBN to look for
ways to bridge this gap in line with its strategic mandate.
One of these new products, the DBN Finance to Finance (F2F)
product, is especially designed for financial institutions (FIs) that lend to
MSMEs through the likes of microfinance banks, microfinance institutions,
financial NGOs, cooperatives, fintech companies and other non-bank financial
institutions.
Through this product, which has a tenor of up to seven
years, the DBN makes funds available to FIs who are unable to receive funding
directly from DBN to disburse to their MSME customers.
This way DBN is able to expand its reach to the MSMEs The
FIs who will qualify for this product would be expected to have active MSME
portfolios and demonstrate a commitment to lend the funds to the target MSMEs.
The second offering, the Non-Interest Banking product, is
developed for applicable participating financial institutions (PFIs) for
on-lending to their MSME customers under the non-interest banking window.
The fund, which is in support of the PFIs’ funding to their
MSME customers, is a demonstration of the DBN’s commitment to increasing the
availability of its funding to all MSMEs across the country.
The product, which is also aimed at promoting financial
inclusion in the country, is available to all non-interest banks as well as
other financial institutions who have non-interest banking products and wish to
utilize DBN funds to deploy non-interest banking loans to their MSME customers
for a tenor of up to five years.
The Long-Term finance product is a loan product provided to
PFIs to support their long-term lending to MSMEs for a period of up to ten
years.
The structure of the fund is flexible and can be easily
adapted to suit the PFIs’ peculiar needs and finance structure. Any PFI can
request for this facility to cater for the long-term finance needs of its MSME
customers where there are tenor mismatches between available funding and
customers funding requirements.
It is worthy to note that all these products are meant to
cover all aspects of the MSMEs sector irrespective of, location, industry or
business cycle.
They are, however, meant for those MSMEs with less than 250
employees, an asset base of less than N1.125 billion, and an annual turnover of
less than N950 million. The maximum loan size disbursable to any of the
qualifying MSMEs is N200 million.
These products could not have come at a better time when
both the global and local economies have been battered by the effects of the
COVID-19 pandemic.
Nigeria, just like other countries of the world, has had its
fair share of the pandemic and its effects, leading the country into a bad
economic depression – the worst since the 1980s and the second since 2015.
The lockdown led to the closure of many businesses, mostly
the micro, small and medium-scale enterprises (MSMEs), in the country.
Those who survived or surviving are struggling to get on
their feet once again as they are besieged with challenges of access to
finance.
Also, the capacity of the banks and other lending
institutions to provide access to financing has been reduced due to the
slow-down in economic activities, on the other hand, and the enormity (number
and volume) of the demands for financing by MSMEs has also contributed to the
development of these three new banking product offerings.
Development Bank of Nigeria, which commenced operations in
2017, has between 2018 and 2020, disbursed N323 billion to over one hundred and
thirty-six thousand (136,000) MSMEs across the six geopolitical zones of the
country through the PFIs.
With the creation of these products, the Bank is poised to increase its impact on the operations of the MSMEs in Nigeria.
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