President Goodluck Jonathan on Monday launched the Development Bank of Nigeria to tackle the challenge of access to fiancé by Micro, Small and Medium Enterprises (MSMEs) in Nigeria.
Development Bank of Nigeria is expected to take off with a seed capital of $1.5 billion.
Launching the Bank at the banquet hall,of the Presidential villa in Abuja, the President said it is a demonstration of his administration’s effort to empower small businesses in Nigeria.
When fully operational by the end of the year, DBN is expected to disburse new loans to about 300,000 small businesses.
Jonathan while acknowledging the critical role of MSMEs to the economy said access to finance has hindered their contribution to the to the country’s economic growth.
The President noted that “commercial banks have consistently denied MSMEs the much needed funds despite several government interventions which explains why lending to the sector still hovers around 5 percent of total lending in the country.”
He added that the Bank will provide the much needed private sector funding that will revolutionize lending to small businesses in the country.
According to Jonathan, it will practically address the problem of access for small businesses on a sustainable basis as it will be private sector driven and would not have to rely on government subsidies for its operations.
“Development Bank of Nigeria will alleviate the financial constraint faced by small businesses in Nigeria by providing financing, partial credit guarantees and technical assistance to eligible financial intermediaries on a regular fully financed basis,” he added.
For her part, Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, while noting that lack of access to finance has been a major hinderance to the growth and development of small businesses in Nigeria said that with the launch of the Development Bank of Nigeria (DBN), the era of inability to access long term finance will be a thing of the past.
The CME added that DBN will make facilities of up to ten years tenor including a moratorium period of 18 months available to MSMEs before they start to repay saying that at the moment you have a situation where within 3 months business owners start to pay the loans before they even get your business ideas together.
According to her, DBN will break the jinx of financing so that small businesses can actually have a full fledged institution that would help finance special institutions at an affordable levels that they can access.
“Nigerian enterprises do not have access long term finance, they are forced to borrow short term for long term investment. DBN would focus on helping them Small and Medium size enterprises and medium term corporate sector to create wealth, diversify the economy and create jobs.
“I share in the President’s belief that the most valuable change we can make as a government is ensuring that we break this jinx so that small businesses can actually have a full-fledged institution that will provide this access. Not just access, but access in a manner that does not stifle them but instead grows them; access that gives them space to afford a decent life while nursing their businesses; access in a manner that will not take substantial portions of their profits away from them; access to the sort of finance that empowers them and their communities. Simply put, access to credit means financial inclusion, financial inclusion helps convert people’s dreams to reality.
“This is the reason why we are here today, this is the reason why the President is also here, to launch the flagship bank that gives all Nigerians a chance not only to dream….but to also see that dream become reality!
DBN, like the other institutions established and coordinated by the Federal Ministry of Finance under this administration – the Nigerian Sovereign Investment Authority (NSIA) and the Nigeria Mortgage Refinance Company – are practical expressions of President Jonathan’s determination to realize a stronger economy that creates jobs and delivers tangible benefits for the Nigerian people, she said.
The DFID, World Bank, African Development Bank, Agence Française de Développement (AFD) and KfW (Germany) also contributed to the funding of DBN.