Development Bank of Nigeria (DBN), the federal government’s development banking institution with a mandate of addressing the major financing challenges facing micro, small and medium scale enterprises (MSMEs) in Nigeria, has launched three new and innovative products, the DBN Finance to Finance (F2F) Product; the DBN Non-Interest Banking Product; and the DBN Long-Term Product, which are expected to provide the much-needed access to financing window to the MSMEs through its participating financial institutions (PFIs).
According to the bank this will further address the existing access to finance challenges facing MSMEs in the country, that have been exacerbated by the effects of the coronavirus pandemic.
Prior to the outbreak of the COVID-19 pandemic, the funding gap in the MSMEs sector in Nigeria was a whooping N48 trillion, according to Godwin Emefiele, the governor of Central Bank of Nigeria (CBN).
One of these new products, the DBN Finance to Finance (F2F) product, is especially designed for financial institutions (FIs) that lend to MSMEs through the likes of the microfinance banks, microfinance institutions, financial NGOs, cooperatives, fintech companies and other non-bank financial institutions. Through this product, which has a tenor of up to seven years, the DBN makes funds available to FIs who are unable to receive funding directly from DBN to disburse to their MSME customers. This way DBN is able to expand its reach to the MSMEs.
The FIs who will qualify for this product would be expected to have active MSME portfolios and demonstrate a commitment to lend the funds to the target MSMEs.
The second offering, the Non-Interest Banking product, is developed for applicable participating financial institutions (PFIs) for on-lending to their MSME customers under the non-interest banking window. The fund, which is in support of the PFIs’ funding to their MSME customers, is a demonstration of the DBN’s commitment to increasing the availability of its funding to all MSMEs across the country. The product, which is also aimed at promoting financial inclusion in the country, is available to all non-interest banks as well as other financial institutions who have non-interest banking products and wish to utilize DBN funds to deploy non-interest banking loans to their MSME customers for a tenor of up to five years.