It is amazing that with over 37 million SMEs in Nigeria, more than 95% don’t have access to credit. This shouldn’t be so if these SMEs contribute to more than 50% of the Nigerian GDP. No wonder many businesses end up dying within the first few years of operation.
The place of capital in running a business cannot be overemphasized. There are two ways of raising capital for business purposes, equity and loans. In this post, we will discuss how you can access a DBN loan in Nigeria.
About the DBN
By now you must be asking the question, what is DBN? DBN is an acronym that stands for the Development Bank of Nigeria. The Federal Government of Nigeria together with other development partners worldwide put heads together to establish this bank. Some of these development partners include the African Development Bank and the World Bank.
The DBN has a major objective, to alleviate the financial challenges of the MSMEs in Nigeria. Like we stated earlier, these businesses have a challenge accessing funding to move their businesses forward. These businesses must receive such help because of the role they play in helping the Nigerian economy.
According to the DBN, SMEs in Nigeria are hindered by the lack of payment services, credit, and access to equity. To this end, the bank has made the following products available to SMEs:
a. Capacity building.
b. Wholesale lending
c. Partial credit risk guarantees.
Learn more about products and services from DBN here.
Who can get access to a DBN Loan?
Just like it is with every other loan facility, not everyone can access loans from DBN. If you don’t run an SME, you already have a limitation. This is because the loans are designed to meet the needs of SMEs in Nigeria.
So the question is this, do you run or plan to run an SME in Nigeria? If your answer is yes, then you can get access to any of the loans from DBN. It doesn’t matter if the business is existing or still at the conception stage.
The DBN promises risk-sharing and funding through PFIs. PFI stands for Participating Financial Institutions and they include:
a. Microfinance banks.
b. Commercial banks.
c. Development Finance Institutions (DFIs), etc.
The PFIs work in partnership with the DBN to release funds to all eligible applicants. What this means is that you cannot apply for any DBN loan directly to the DBN. It must be through any of the PFIs stated above.
Here’s some good news, the loan tenors for DBN loans are very flexible and the interest rates are low. Do you know that you enjoy a moratorium of about 18 months with this loan? You also have up to 10 years to finish paying the loan.
It is expected that by the end of the first 18 months of operation, your business should have gained some footing. These loans were not designed to overburden SMEs, instead, they were meant for the exact opposite.
How to get a DBN Loan
By now, you must be wondering how you can apply for this loan. It isn’t as complicated as you think. We will explain the process in the next few steps:
Step 1 – Go to a Participating Financial Institution. You can choose any of a commercial or microfinance bank or a Development Finance Institution. Make sure that you already have an account with any of the PFIs you approach.
Step 2 – Express your intention by filling a DBN application form. Submit the form as well as other necessary documents.
Step 3 – The application will go through some scrutiny by the PFI to judge the purpose of the loan. Once the PFI deems your application fit, it applies to the DBN on your behalf for funding.
Step 4 – The DBN also passes the application and the business through some scrutiny. Once it sees the application as worth it, it provides the PFI with the funds needed. The PFI then provides the funds to you.
Here’s a list of qualified PFIs where you can apply for the DBN loan.
Eligibility Criteria for PFIs
By now, you must be pumped up about receiving a DBN loan in Nigeria. Well, the PFIs also have a role to play before they can be on the DBN’s list of approved PFIs. There are certain eligibility requirements that PFIs must satisfy throughout the financing period.
The DBN and its representatives carry out due diligence checks to be sure that PFIs keep to the requirements. Defaulting at any stage of the financing period may lead to the PFI paying up all the advances. These are some of the eligibility requirements that a PFI needs to adhere to:
a. Possess a valid license to run a financial or banking outfit in Nigeria. This license is issued by the Central Bank of Nigeria.
b. Make available details of the last 3 financial years along with another 2 years of profitable lending.
c. It should present its measures for risk management and its levels of acceptable loan portfolio. This should be in terms of quality and performance.
Learn more about the eligibility criteria for PFIs to make DBN’s approved list here.
FAQs about DBN Loans in Nigeria
Here are the answers to some FAQs relating to accessing DBN loans in Nigeria.
Can an SME apply directly to the DBN for a loan?
No. You cannot apply to the DBN for a loan. You have to go through any of the PFIs listed above. These bodies assist the DBN with credit evaluation, disbursal, and loan supervision.
What are DBN loan interest rates?
The rates are based on the loan tenor and the current market rates. Regardless, they are very flexible and SME-friendly.
Is there a difference between regular commercial bank loans and DBN loans?
Yes, there is. DBN loans are not as stringent and have more flexible rates than loans from commercial banks. DBN loans also have longer tenors.
The information in this post should make it easy for you to access a DBN loan in Nigeria. Simply pick up a DBN loan application form from your PFI and follow through with the process. Any other questions? Reach out to your bank officer.