According to the DBN, Nigeria has more than 37 million MSMEs but not up to 5% can access credit. When you consider this rate, it easy to see why many of these businesses pack up within a few years.
Capital is very important to running any business and credit is one of the chief ways to raise capital. Considering the role SMEs in Nigeria play in supporting the economy, the DBN was established to loans available to SMEs. The question now is how can you access a DBN loan?
About the DBN
Before we discuss how to access a DBN loan in Nigeria, let’s briefly discuss the DBN. DBN stands for the Development Bank of Nigeria and it is a financial institution established by the Federal Government of Nigeria. The FGN established this bank in conjunction with several development partners worldwide.
This financial institution has one key objective, alleviating the financial constraints that MSMEs in Nigeria face. They intend to achieve this by providing financing as well as partial credit. The DBN believes that SMEs in Nigeria suffer stunted growth because they lack access to equity, payment services, and credit.
Some of the products and services of the DBN include:
a. Wholesale lending
b. Capacity building
c. Partial credit risk guarantees
Click here to find out more about each of these products and services.
Who can access a DBN loan?
It is important to answer this question because not everyone can access a DBN loan in Nigeria. These loans are designed to help SMEs in Nigeria majorly. So for starters, all MSMEs can access these loans. It doesn’t matter if they are existing or at the startup stage, as long as they carry out productive activities.
The DBN provides risk-sharing guarantees and funding via Participating Financial Institutions or PFIs. These PFIs in turn lend the funds to eligible loan applicants. This means that individuals or businesses cannot submit loan applications to the DBN directly.
Since you can only access a DBN loan through PFIs, what bodies fall under this category?
PFIs include but are not restricted to the following:
a. Commercial banks
b. Microfinance banks
c. Development Finance Institutions (DFIs)
A couple of other financial bodies also fall into this category. You must be interested in the loan tenure for loans from this financial institution. Well, the loan tenure is quite flexible. That should be great news if you are planning to get a loan from the DBN.
First, you can enjoy a moratorium of up to 18 months. Then you can pay up the loan over about 10 years. A Moratorium period is a time after getting a loan that the borrower isn’t required to make any repayments. It extends to a few months after the loan was disbursed depending on the body providing the loan.
The DBN believes that within these 18 months, the business should have gained some ground. Interest rates are also not over-burdening for SMEs. They are financially sustainable and market-conforming.
Getting a DBN Loan
In this section, we will share with you the steps you should take to access a DBN loan in Nigeria. They include:
Step 1 – Visit a Participating Financial Institution. This can be your commercial bank, Development Finance Institution, or Microfinance Bank. When you do, you can express your intention to access a loan.
Step 2 – Submit your loan application along with the necessary documents.
Step 3 – The PFI assesses the loan application. This includes appraising the business you run and the purpose of the loan. If it deems it fit, the PFI applies for funding from the DBN.
Step 4 – The DBN further appraises the loan application and the business. If it sees the application as worthy for a loan, it makes the funds available to the PFI. The PFI then makes the loan available to the qualified borrower.
Click here to get a full list of the qualified PFIs from which you can access a DBN loan in Nigeria.
Eligibility Criteria for a DBN Loan
There are specific requirements that SMEs in Nigeria must fulfil to access DBN loans. However, in this section, we will discuss the requirements that PFIs must satisfy before receiving financing from the DBN. The PFI is required to maintain these requirements all through the financing period.
It is important that the PFI doesn’t breach the requirements. This is because the DBN or one of its representatives conducts due diligence processes annually to check. If the PFI breaches these requirements and doesn’t make amends during the grace period it will have to pay up all advances.
Now, let’s look at the eligibility requirements a PFI must satisfy:
a. It must possess a valid license issued by the CBN to run a banking or financial company in Nigeria.
b. It has to provide details about the last three financial years along with two years of profitable lending. Also, it must show its risk management controls and procedures along with acceptable loan portfolio levels in performance and quality.
To learn more about the DBN’s eligibility criteria, click here.
Frequently Asked Questions about DBN loans in Nigeria
To help SMEs in Nigeria in their quest for DBN loans, here are the answers to a few FAQs.
Can an SME get a direct loan from DBN?
No. The Development Bank of Nigeria does not provide loans to SMEs directly. Instead, it channels the loans through financial institutions known as PFIs. These PFIs handle credit evaluation as well as loan supervision.
What is the loan tenure?
The DBN has made its loan payment very flexible. It allows a borrower up to 18 months moratorium depending on the business. You have a maximum of 10 years to repay the loan.
What are the interest rates on DBN loans?
The interest rates are flexible based on the loan tenure and current market rates.
What is the difference between DBN and commercial bank loans?
DBN loans are designed to assist SMEs in Nigeria access financing. As a result, they are less stringent than loans from commercial banks. They have more flexible rates and longer repayment tenures.
Conclusion
With this information, SMEs in Nigeria don’t have to suffer a lack of capital anymore. Simply visit your bank and submit an application for a DBN loan. If you have any further questions, you can speak to your bank officer.
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