How Devt Bank can fill gaps left by BOI, others
When the Minister of Finance Kemi Adeosun announced the establishment of the Development Bank of Nigeria (DBN) for Micro, Small and Medium Enterprises (MSMEs) late last year, many stakeholders heaved a sigh of relief. This is because with the establishment of the bank, it is hoped that there will be increased access to finance for the MSMEs through eligible financial intermediaries.
The DBN will provide loans to all sectors of the economy including, manufacturing, services and other industries not currently served by existing development banks thereby filling an important financing gap.
However, the operations of the DBN will not in any way result in the elimination of the Bank of Industry (BOI), Bank of Agriculture (BOA) or any other existing development bank.
The question however is, what is BOI and BOA not doing right and which informs the establishment of the DBN?
Some MSMEs operators bared their mind to Daily Trust on the matter thus:
The Bank of Industry needs experts in different sectors who understand the business environment to help it serve MSMEs better, says Mr Abiodun Folawiyo, CEO of Shoespeed Interglobal Services Limited.
“BOI does not understand the practical challenges we have in our various sectors. As a shoemaker, if I want a loan from BOI and I tell a BOI official that I want to bring in machine from Italy for N60 million to scale up my business, the question he will ask is where is your collateral. But, what I expect such official to talk about is, ‘can you give us the link or the contact of the company’. Let us talk to the manufacturer to know what quantity the machine can produce per day; and what is the cost of maintenance’, so that they know what I am talking about is realistic.
“So, the BOI’s rule that all businesses must always meet a particular criterion of collateral may not be proper.
“So if the Development Bank must work, they must get experts on investment techniques who understand how different sectors work and not just financial managers alone.”
Another entrepreneur, Anthea Peteru, CEO of Moin Moin Expresso, said though the Bank of Industry was doing a great job, it has not been able to reach those at the grassroots effectively hence the Development bank should fill that gap.
“BOI has empowered a lot of entrepreneurs but there should be a way they can reach those at the grassroots. They should find a way to give concessions to those in the rural areas who may not know how to write a business plan but have thriving businesses.
“If the new Development bank can find a way of developing people at the grassroots, it will help a great deal. For some of them, if they can get little financial assistance it will give their business a boost and by that we are growing the micro sector and the problem of hunger and poverty in the rural areas will be reduced,” Peteru said.
Though the main focus of the DBN is MSMEs, the bank, which is a wholesale one, will lend money to microfinance banks which will then lend on medium to long-term to MSMEs, experts say.
MSMEs contribute 48.47 percent to the Gross Domestic Product (GDP) of Nigeria but have access to only about 5 percent of lending from Deposit Money Banks (DMBs).
However, the DBN will have access to US$1.3 billion (N396.5 billion), which will be provided by the World Bank, KfW (German Development Bank), the African Development Bank (AfDB) and Agence Française de Development (French Development Agency).
As the Development Bank of Nigeria (DBN) begins the final processes of take-off, the Minister of Finance, Kemi Adeosun said the DBN would be positioned to galvanise the SMEs sector for the overall development of the nation’s economy.
With these words, MSMEs are eager to see the take of the bank, with the hope that it will solve the problem of lack of access to loans which has been a major challenge for most of them.