FG to Establish Development Bank to Boost MSMEs …. Secures $1.3b Initial Capital

The federal government has concluded plans to set up a development bank in its bid to lower borrowing rates and provide longer-term loan for Micro, Small and Medium-sized Enterprises (MSMEs).

Despite accounting for almost 50 percent of the country’s Gross Domestic Product (GDP), MSMEs have access to around only five percent of lending from the deposit money banks.

The bank is, therefore, intended to complement the work of other Nigerian commercial banks, which focus on industry or agriculture.

The entity to be known as the Development Bank of Nigeria (DBN) will have access to $1.3 billion in capital secured from a number of development partners.

The required capital is expected to be provided by the World Bank, German development bank KfW, the African Development Bank and French development agency Agence Française de Development.

Government said, on Friday, the bank was ready to commence operations as its executive management team had been selected and an operating licence was expected from the Central Bank.

A development journal, Public Finance International, quoted an official government statement, which claimed that the bank would boost the Nigerian economy by lowering borrowing rates and providing longer-term loans for MSMEs.

The statement said this would provide them with flexibility in cash flow management and the opportunity to “make capital improvements” and acquire equipment or supplies.

“As the economy diversifies, the growth of the MSME sector will have a positive impact on the economy through employment generation, wealth creation and economic growth,” it stated.

The idea of the DBN was originally conceived in 2014, but its creation has been fraught with delays.

The statement said the present administration had sought to iron out these issues by 2017 after inheriting the initiative two years ago.

It added that the development bank is distinct, because it focuses on smaller businesses and will do business in sectors that are not served by the country’s other development banks.

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