Most Nigerian Banks Don’t Understand How MSMEs Operate- DBN MD

The Development Bank of Nigeria has said that banks are unable to finance most Micro, Small and Medium Enterprises and startups in Nigeria because they lack proper understanding of how these businesses operate.

The Managing Director of the Development Bank of Nigeria, Toni Okpanachi, said this on Thursday during the National SMEs Discourse titled ‘Little Beginning; Big Impact.’

In Nigeria SMEs account for 76 per cent of employment opportunities in Africa’s biggest oil producer.

Nigerian MSMEs are scouting for funds with the credit gap in the sector amounting to $1.5trn, but the sector is responsible for 50 per cent of the Gross Domestic Product, according to the Minister of State for Industry, Trade and Investment, Mariam Katagum.

Okpanachi said, “There is so much funding, financing intervention fund and several other commercial financing available.

“How come MSMEs are not able to access it? If you look at the financial institutions, the DMBs the Micro Finance Banks and other financial institutions, it is their business to lend, so why are they not lending? On the other side, you see the SMEs field request for funding, how come they are not able to get the finance.

“That is the disconnect between them and one thing we found out is from the funding side where you have the DMBs and other financial institutions, the challenge is how much do you understand MSMEs business.

“How are they able to assess their risks to be able to be comfortable to lend to them. On the other side, the Micro Small and Medium Enterprises, how are they able to market their businesses to be able to access fund. Unless we are able to deal with this dichotomy, it is going to be a major issue.”

The DBN Boss said as a result of the knowledge gap, the bank has come in to provide capacity building for MSMEs to be able to package their business plans so that they can access funding from financial institutions.

“On the other side, we work with financial institutions for them to understand the business of the se Micro and Medium Enterprises. We have also come up with what we call technical assistance with the financial institutions,” he added.

He said the bank is currently working with 43 financial institution across the country to reach out to SMEs.

According to him, by last year December 2020, N334bn has been disbursed to that sector, adding that 57 per cent of the funding were granted to women owned enterprises.

But the Central Bank of Nigeria earlier in the session said to close the credit gap, it has given out sizeable portfolio of funding to SMEs.

Yusuf Yila, who representing the CBN Governor, Godwin Emefiele said out of the concessionary interventions given out by the apex bank, over N2trn had been disbursed to SMEs.

He said this is about 32 per cent of all interventions to different sectors.

“What the Central Bank has tried to do to address this is working with the Bankers’ Committee, we realized that the channels that we traditionally used to finance MSMEs is bringing the Deposit Money Banks are not in sync with the aspiration and the needs of the typical MSMEs.

“Working with the Bankers’ Committee, what was done was to create or put in place a national micro finance bank and that national micro finance bank is going to exists in all the 774 local governments of the country. As at today, they are over 106 branches across the country.”