As Development Bank of Nigeria debuts

With the issuance of an operating licence to it by the Central Bank of Nigeria (CBN), Development Bank of Nigeria (DBN) can be said to be fully operational now. This much was contained in a statement by Minister of Finance Kemi Adeosun, citing a March 28th 2017 letter to the Managing Director of DBN and signed by Deputy Governor of CBN in charge of Financial System Stability. DBN was issued a Wholesale Development Institution Licence.

Clarifying further, Adeosun stated that, “The approval was subject to meeting the minimum capital requirement of N100 billion and the reconstitution of the Board of the Bank and reviewing its organogram.” She also said DBN will have access to US$1.3bn (N396.5 billion) which has been jointly provided by the World Bank, KfW (German Development Bank), African Development Bank (AfDB) and the Agence Française de Development (French Development Agency). This is just as the bank is also finalising agreements with the European Investment Bank (EIB), she added.

DBN was conceived as a game changer in the fortunes of the country’s Micro, Medium and Small Scale Enterprises (MSMEs) who operate in the informal sector. These enterprises constitute the structural base of the Nigerian economy as they contribute as much as 47.8% of the country’s Gross Domestic Product (GDP), yet have access to less than 5% of commercial loans in the country as disbursed by Money Deposit Banks (MDBs). This situation which had bothered several governments over time, spurred the administration of President Goodluck Jonathan to launch the DBN scheme in 2015, even as its blueprint was developed in 2013 by a team led by former Vice President Namadi Sambo. The recent issuance of an operational licence by CBN marks the conclusion of the gestation period of DBN.

As a wholesale development institution, DBN will not lend money to private individuals in the fashion of regular Money Deposit Banks (MDBs). It will rather address itself to its core mandate of empowering the operators in the informal sector who had been unable to access funds from the regular commercial banks due to stringent conditions of high interest rates, requirements for bankable collaterals, and short tenure for loans. Instead, DBN is expected to address itself to giving loans with lower interest rates and longer tenures that are not suffocating to beneficiaries.

Having come so far, the institution will do well to address its mandate with the caution and dispatch required given the state of the economy which is currently in recession, and the riotous state of the country’s informal sector. The sector into which DBN is venturing offers nightmarish challenges to the regular financial service providers, hence their reluctance to engage there meaningfully. Yet the fact remains that public expectation from the institution is for it to launch a revolution in that core area of intervention.

For DBN to succeed it needs to initiate a new business culture for the informal sector that will migrate the progressive ones among them towards modern best fit business management practices. That is the only way its intervention will generate change for the sector. Also critical to its success is the need to promote sanity among the Micro Finance Banks through whom it shall on-lend to the MSMEs. As presently established most of these MFBs are mere family owned entities whose primary business goals are hardly altruistic.

In the same vein, while the government may have assured that all necessary safeguards have been incorporated to insulate DBN from the traditional tendencies of interference by the powers that be, the onus lies on the bank’s management to ensure that the project flies.