In its operations since 2017, the Development Bank of Nigeria (DBN) has provided the Micro, Small and Medium Enterprises (MSMEs) sub-sector stable long-term financing window. The Managing Director, Mr. Tony Okpanachi, told senior business journalists in Abuja, at an interactive session, that his organization has channeled over N482 billion to operators in the sub-sector with 60 per cent beneficiaries being women and youth-owned businesses. Emma Ujah, our Abuja Bureau Chief, was there for Vanguard. Excerpts: There have been different organizations created by the Federal Government to fund MSMEs in the past which failed.

How would you ensure that DBN does not suffer the same fate?

Since its inception, the institution has fared exceptionally well across various areas and this underscores our drive for sustainability which is one of our core values. For us, this means that while we are in business to provide financing support for MSMEs, we strive to be financially sustainable while ensuring we create social impact for MSMEs and the communities around us, and also ensuring our activities do not adversely affect the state of our environment but rather contributing to its resilience and sustainability. Now, more specifically, in terms of providing financing support for MSMEs, from inception to end of 2021, DBN disbursed N482 billion to more than 208,000 MSMEs. The bank’s profitability has also remained resilient despite the challenging environment and the impact of COVID-19.

Profit before tax and profit after tax stood at N22.7 billion and N15.7 billion respectively, translating to return on assets and return on equity of 4.8% and 12.8% respectively for 2021 which was our last audited financial period. Across other metrics such as environmental sustainability, DBN has taken major steps to ensure that its processes and operations align with the global standards on environmental sustainability. A major feat in this direction is the achievement of the highest global rating of the Sustainability Standards and Certification Initiative (SSCI) by the European Organisation for Sustainable Development in 2021. In the same year, the Bank clinched the highest credit rating, Triple ‘A’ from Agusto & Co, and GCR.

How have the distortions in the global and national economy impacted the performance of the facility of the bank given that the CBN had to grant a moratorium for its facilities?

The headwinds from the global and national economy impacted DBN as much as they did to many other organizations within and outside the country. Consequently, these distortions made the pricing of DBN loans less attractive to financial intermediaries. Nevertheless, we keep broadening our funding base to make financing more available for MSMEs in line with our overarching mandate to alleviate financing constraints for MSMEs in Nigeria.

In addition, DBN has various products and programs targeted at meeting the needs of MSMEs. For instance, DBN has an interest drawback program for its PFIs through which they grant rebates on loans to MSMEs playing within sustainability sectors such as renewable energy, waste management, etc. The interventions of the CBN for Nigerian MSMEs did not disrupt the impact of DBN within the MSME space in that the financing needs of MSMEs within the system are enormous. And although DBN is poised and committed to solving these challenges especially as it relates to bridging financing gaps, MSMEs in Nigeria need several players to intervene in alleviating these constraints, which underscores the imperative for the CBN and other financial institutions to play their role in this area.

How would you rate the different systemic initiatives? Would you prefer that the DBN serve as the conduit for these interventions, particularly those that affect SMEs?

The MSME sector faces many difficulties, particularly when it comes to obtaining financing. Therefore, it is better to address these difficulties when multiple players are able to support this space. As a result, one of our responsibilities at DBN is to evaluate the goals of these other organizations and work with them to support MSMEs financially. DBN frequently provides these institutions with technical assistance programs to increase their ability to lend to MSMEs.

What are the short-, medium-, and long-term goals of the bank?

By reaching more MSMEs in underserved areas, like those affected by crises, and increasing development impact in other crucial areas, like startups, women- and youth-owned businesses, and first-time borrowers, we hope to fortify our catalytic role in the Nigerian economy in the near future.

We will also keep enhancing our internal capabilities to support the institution’s expansion goals. Furthermore, by implementing our green finance strategy, utilizing our SSCI certification, and investigating Green Climate Fund (GCF) accreditation as a direct access organization, we intend to strengthen our sustainability drive.

In order to strengthen our balance sheet resilience in the face of the difficult macro and commercial environment, we also intend to attract more social and impact funding. Lastly, in order to improve our participating financial institutions’ ability to lend to MSMEs, we will keep offering technical help and capacity building for MSMEs.

We intend to finish the digital transformation initiatives that are presently in progress within the bank and broaden our channels of distribution to MSMEs in the medium term, which reflects our desire to work more closely with other industry participants. Our long-term goal is for DBN to be known both domestically and globally as the leading organization promoting the expansion and sustainability of the Nigerian economy by offering financial assistance to MSMEs.

There has been a lot of demand for DBN to increase its capital. Do you require additional funds? Are there any intentions to raise money from any sources, such as the capital market or enlisting equity investors to increase their holdings?

It’s critical that we keep bolstering our financial base since, as a DFI, sustainability is not simply a concern; it’s ingrained in our company and reflected in our basic principles. Additionally, this is one of our strategic projects that calls for ongoing work to get additional funding. We are on the path to achieve this. In order to satisfy the demands of MSMEs, we keep growing our capital and loan finance base.

The DBN has won numerous accolades and earned high marks as Nigeria’s premier development finance organization. The Sustainability Standards Certification Initiative (SSCI) Project’s highest grade, level 5, is one example. DBN is now the first DFI in the nation to receive a rating this high under the Initiative. What does this signify for the Nigerian economy and the DBN?

At DBN, sustainability is ingrained in our DNA and one of our basic beliefs. As evidence, it is the first core principle that our organization upholds, and it is represented in every aspect of our structure, including people, procedures, and technology. Integrating fundamental sustainability concepts into our policies, procedures, and processes was made possible in large part by the SSCI rating.
The benefits of improving important procedures in our general operations, goods, business model, and technology are already evident to us, but let me discuss three significant areas that particularly stood out to us as a company. The development of DBN’s Purpose Statement and High Impact Goals reflected the enormous importance of the SSCI process. These have aided in bringing sustainability back into the forefront of our thinking.

Second, our operations have seen a return of innovative thinking as a result of the recently established Innovation Framework. We anticipate that this new approach will contribute to better financial and non-financial outcomes for our organization as a whole. Last but not least, our recently created Stakeholders Management Framework has allowed us to consider innovative ways to maintain a continuous loop of communication with the individuals and groups that matter to us the most.
This ranking for the Nigerian economy indicates that a national DFI is making deliberate choices now on behalf of the nation that will protect lives and means of subsistence in the future. This embodies sustainability, and we think DBN has taken on the role of a steward of this promise for our nation.

Our nation’s future depends on both fostering an environment-conscious culture and establishing the framework necessary for MSMEs to prosper. DBN will be offering the much-needed assistance to spur MSMEs’ and the nation’s growth.

According to the most recent data from the National Bureau of Statistics, MSMEs had 39,654,385 total members in 2020, and their total assets were N8.41 trillion. More than 34 million of these businesses are unofficial. What do you think about the vast majority of MSMEs continuing to function as unofficial enterprises?

The associated benefits to the government and economy make the formalization of these businesses crucial. For obvious reasons, more has to be done, even though the government has done a lot to highlight the significance of MSMEs. Policies that encourage operators in the informal sector to formalize, for instance, should obviously have a time limit, but lowering company registration fees and deferring taxes on all enterprises would surely encourage the formalization of some of these businesses.

Formal and informal MSMEs are already struggling to survive. Obtaining financing, erratic power supplies, inadequate infrastructure, multiple taxes, rent, cost of capital, and other issues are some of their most urgent issues. It makes sense that formalization is not a top priority for them given the numerous obstacles and their already decreased inclination to save.

What effect does this have on our economy?

It has been demonstrated that formal businesses are more likely to survive and are better able to operate economically and make better use of debt. Increased financial sustainability has a major effect on employment, economic activity, and government revenue from taxes and levies.

Despite your claims that there are no hidden fees, SMEs are reporting that getting loan from PFIs is difficult and is made worse by high interest rates and hidden fees from banks. What steps is the DBN taking to guarantee that SMEs can obtain loans at reasonable rates?

First of all, it will be challenging to characterize DBN as a development finance organization if we do not take action to address the issues raised regarding loan availability inside the system. The high interest rate in the environment is something we are well aware of. In order to make finance more available for MSMEs in the face of the difficult macro and business environment and in keeping with our main mission to ease financial burdens, we as an organization work to attract more social and impact funding.

Furthermore, DBN offers a number of initiatives and solutions aimed at enhancing MSMEs’ accessibility. High interest rates are a reflection of the macroeconomic climate, and if several funding sources are crowded, competition will ensue, which will ultimately guarantee market-driven pressure to reduce interest rates, as is the case in other countries.

Writing business plans that PFIs will accept is a challenge for many SMEs, particularly start-ups. What is the DBN doing to fill the void left by SME owners who have good intentions but lack the skills necessary to draft business plans?

On-lending, risk-sharing, and providing technical support to member financial institutions are the three main responsibilities of DBN. But, as a bank, we saw that it was also necessary to make sure that MSME owners had the tools necessary to run their companies wisely. Consequently, we implemented capacity building for the end-beneficiaries at the beginning of our activities.

In this context, we have taught more than 1300 companies nationwide that operate in a variety of industries. We accomplish this by working with partners like Google Africa, the Lagos Business School’s Enterprise Development Center, and Wider Perspective Limited to provide MSMEs with training on a variety of modules, including marketing, management, accounting and record-keeping, negotiations, green finance, sustainability, and business planning. These trainings have been a huge success, as the recipients have shown that they have a better grasp of the industries in which they operate as well as how to create and carry out business plans.

Then there is the bookkeeping problem. Will the DBN think about funding or implementing a program aimed at teaching our SME owners accurate bookkeeping procedures?

Indeed. We provide a wide choice of courses, including a highlighted module on accounting and record keeping, as previously mentioned. Our selection of courses in the Entrepreneurship Program is specifically designed to address the needs of MSMEs in the areas of finance, operations, marketing/sales, and customer service, among other facets of entrepreneurship.

Usually, we post an application call on our website, social media accounts, and in a few national newspapers. Prior to implementing the course, we then shortlist the individuals based on predetermined criteria. However, we are introducing the DBN Learning Management System this year, which will enable a lot more MSMEs to get training through our Bizaid app and website.

The Bank awards a certificate upon completion and achievement, which ought to attest to the holder’s proficiency in the courses studied. We also offer advice sessions at the conclusion of the program, which happen three months later. This is to guarantee that the knowledge they acquire becomes ingrained in their individual enterprises.

What percentage of the credit that DBN facilitated is deemed nonperforming, and what steps is DBN doing to get this credit back?

The bank has not yet recorded any non-performing loans (NPLs) in its portfolio, demonstrating the effectiveness of our robust risk management system and the outstanding efforts of our participating financial institutions and the entire DBN team.