Businesses situated in northern Nigeria got loans worth N125 billion, an equivalent of 25 per cent of all loan disbursement portfolios by the Development Bank of Nigeria (DBN) in 2021, an analysis of its annual report has shown.
There were reports that northern businesses only got 11% of N483bn loans from the bank with 47% of that going to Lagos alone. At the 11% worth of loans to the North, it meant that northern businesses got just N53bn of the N483bn loans while beneficiaries in Lagos collected N227bn loans.
However, a Daily Trust analysis revealed that loan beneficiaries from the northern part of the country got up to N125bn (25%) of the N500bn loans the DBN disbursed last year.
Analysis of the annual report for the year ended 2021 indicates that 26% of total beneficiaries of DBN loans as of December 2021 were from Lagos; 22% of the end-borrowers were from other parts of the South-West.
Business operators in the North (comprising North West, North East and North Central) constituted 20% of the DBN loan beneficiaries while businesses in Abuja (the capital city and part of the North Central) accounted for six per cent of the loans destination in 2021. In combination, businesses in the north attracted up to 26% of loans from DBN in the year under review.
About 17% of the other loans went to beneficiaries in the South-South and nine per cent to those in the South East.
Also commenting about the annual report and loan disbursement patterns, during an exclusive chat with Daily Trust, the Chief Executive of DBN, Tony Okpanachi said the annual report was the true representation of the disbursements as he dismissed figures quoted in the previous media report alleging the exclusion of business operators in the north.
Okpanachi also said he was at a Senate hearing last week on the disbursement of loans to Micro, Small and Medium Enterprises (MSMEs) in the six geo-political regions by the DBN.
The bank’s head said there are criteria set by the Central Bank of Nigeria (CBN) for loan disbursement.
“Our lending has criteria and they are the same as those set by the Central Bank of Nigeria,” he noted.
Okpanachi said for a business to qualify for the DBN loan, it must have less than 250 employees and must not have done a turnover of more than N1.1 billion.
According to him, the location of the registered MSMEs in Nigeria also explained the reason for the loan’s disbursement, adding that out of the registered MSMEs across Nigeria, Lagos alone has 25%; the South-West has 23%, South-South accounts for 18% of the businesses and the South-East has 10%.
Okpanachi said while the North-Central has 10% of the total registered business population, the North-West geopolitical zone has nine per cent, the Federal Capital Territory (FCT) accounts for four per cent and the North-East accounts for two per cent.
The DBN boss also noted that the bank has urged participating financial institutions to build the capacity of small-scale businesses and train them on how to structure their businesses for them to be able to access the loans.
“For DBN, it’s a continuous process to get more businesses on board,” Okpanachi noted.
DBN operating model
Speaking about the operating model of DBN, Okpanachi said it is a wholesale lending model, which means that DBN does not lend directly to MSMEs. Instead, it on-lends through its Participating Financial Institutions (PFIs), which are primarily commercial banks and microfinance banks.
Okpanachi said: “This, therefore, implies that lending to MSMEs is based on the PFIs’ lending criteria and risk assessment of the MSMEs and not by geopolitical allocations, although DBN continues to leverage various instruments and offerings to incentivise its PFIs to direct more lending to key impact segments such as gender, youth, green MSMEs, and economically challenge/underserved regions.”
Providing further updates on the PFIs, he said so far, DBN has onboarded 60 participating financial institutions, most of which have a presence in the northern region to channel funds to MSMEs in the North.
The CEO argued that the geographical spread of DBN loans is not determined by geographical allocations but is based on PFIs meeting DBN’s eligibility criteria and the PFIs’ risk assessment criteria for MSMEs.
“This, therefore, implies that while DBN seeks to improve the impact of its interventions in northern Nigeria, the bank’s disbursements to MSMEs across the country are purely demand-driven and per the PFIs’ assessment.”
He noted that the DBN is aware of the huge financing gap across various parts of the country, especially the Northern region, which has led the bank to intensify its efforts in increasing awareness about its loan products to catalyse the demand for its facilities from the North through various offerings and programs, some of which are highlighted below:
DBN’s short, medium, and long-term focus
The CEO said in the short term, the management would strengthen DBN’s catalytic role in the Nigerian economy by expanding its reach to more MSMEs in underserved regions such as crisis-impacted areas and enhancing development impact in other key areas such as women- and youth-owned enterprises, startups, and first-time borrowers.
“We will also continue to build our internal capacity to drive the growth ambition of the institution. In addition, we plan to amplify our sustainability drive through the implementation of our green finance strategy, leveraging our SSCI certification, and exploring the Green Climate Fund (GCF) accreditation as a direct access entity.”
DBN also plans to crowd in more social and impact funding to build our balance sheet resilience amidst the challenging macro and business landscape.
“We will continue providing capacity building for MSMEs and technical assistance to our participating financial institutions to strengthen their lending capacity to MSMEs,” he said
In the medium term, DBN plans to complete the digital transformation efforts currently underway within the bank and expand its channels of disbursement to MSMEs, which speaks to its drive for increased collaboration with other players within the space.
“In the long term, our focus is for DBN to be recognised locally and internationally as the foremost institution driving the growth and sustainability of the Nigerian economy through the provision of financing support to MSMEs.”
DBN to intervene in credit access, interest rate
Okpanachi explained that, without a drive on the part of the DBN to alleviate these highlighted issues of accessing credit within the system, it will be difficult to describe DBN as a development finance institution.
“We are well aware of the high-interest rate within the environment. Hence, as an institution, we strive to crowd in more social and impact funding to make financing more accessible for MSMEs amidst the challenging macro and business landscape and in line with our overarching mandate to alleviate financing constraints for MSMEs.”
He said DBN has various products and programs targeted at improving accessibility to MSMEs. The issue of high interest rates is a reflection of the macroeconomic environment and crowding in several financing sources would lead to competition and ultimately, ensure market-determined pressure to lower interest as we see in other climes.
Considerations for real SME owners without business plans
The DBN head also revealed that the bank disbursed N482bn loans to 208,000 MSMEs in 2021, out of which 27% of the loans went to youth-owned enterprises while 66% of the firms are owned by women.
The bank further observed the need to ensure that MSME operators are equipped to manage their business judiciously, especially for those without proper business plans.
Okpanachi said: “As a result, we introduced at the onset of our operations, capacity building schemes for the end-beneficiaries.
“In this regard, we have trained over 1,300 businesses operating in diverse sectors all over the country. We deliver this through partnerships such as collaborations with Google Africa, Enterprise Development Centre of the Lagos Business school, and Wider Perspective Limited to train MSMEs on different modules ranging from accounting and record-keeping, marketing, management and negotiations, to green financing, sustainability and business planning.
“We have witnessed immense success at these training sessions as the beneficiaries have demonstrated an improved understanding of the industries they operate, as well as how to develop and implement their business plans.”