How to get access to cheap loans from Development Bank of Nigeria

How to get access to cheap loans from Development Bank of Nigeria

The Development Bank of Nigeria (DBN) is a wholesale financial institution. Its primary goal is to expand access to funding for micro, small and medium-sized enterprises (MSMEs). Individuals or businesses seeking loans to fund their ideas or expand their business might consider getting loans from the Development Bank of Nigeria (DBN) as an option.

Credit is advanced through eligible financial intermediaries i.e. Participating Financial Institutions (PFIs).The DBN was established by the Federal Government of Nigeria (FGN), in partnership with global development partners including the African Development Bank (AfDB), the European Investment Bank (EIB), the French Agency for Development (AFD), the KfW Development Bank and the World Bank (WB).

The DBN is a development finance organization dedicated to assisting Micro, Small, and Medium-Sized Enterprises (MSMEs) in Nigeria with financing, partial credit guarantees, and technical assistance.

With the provision of additional capital, the DBN has contributed to lowering interest rates and increasing loan tenors — enabling businesses to make capital improvements, purchase new equipment and buy supplies.

The Federal Government of Nigeria established the bank to give loans to Micro, Small, and Medium-Sized Enterprises in Nigeria. The bank does not give the loan to the borrower in cash, but rather through Nigerian intermediate banks.

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Who qualifies for the DBN loan?

The loan is open to all MSMEs involved in productive enterprises, whether they are new or established. They must, however, be clients of qualified financial institutions.

PFIs, which include Commercial Banks, Microfinance Banks, Development Finance Institutions (DFIs), and other Financial Institutions, can access DBN loans.

The DBN loan payback length is flexible (up to 10 years with an 18-month moratorium period), and the interest rates are market-competitive and financially sustainable.

DBN plans to give money and risk-sharing guarantees to Participating Financial Institutions (PFIs), who will subsequently lend to end beneficiaries.

Wholesale lending and partial credit risk guarantees

The Development Bank of Nigeria provides wholesale credit and risk-sharing facilities to PFIs, for onward lending to businesses. These PFIs include commercial banks, microfinance banks, existing development finance institutions and leasing companies.

The Development Bank of Nigeria loan repayment terms are flexible. Loan tenors can go up to 10 years, and a moratorium period of up to 18 months can be accommodated. Any interest rates charged are competitive.

The DBN provides credit that is used to support local entrepreneurs and empower business owners. As a result, it aims to have a positive impact on the Nigerian economy through diversification, job creation, wealth creation and economic growth.

This means that the DBN does not directly lend to businesses. Rather, the DBN provides funds to PFIs, who are mandated to provide business credit on its behalf. Credit is typically advanced in the form of a secured or unsecured term loan. Working capital finance is also available.

Which PFIs are eligible for the DBN loan?

DBN or its representative will conduct an annual due diligence process to confirm that the PFI is not in breach of the minimum eligibility requirements and may declare all advances to the PFI immediately payable if the PFI is in breach of one or more of the requirements or fails to remedy the breach of a requirement within any grace period allowed by DBN at DBN’s absolute discretion.

To be eligible to receive financing from DBN, the PFI should have met the minimum eligibility requirements set out below on the Cut-Off Date. The PFI shall maintain the minimum eligibility requirements throughout the Financing Period.

Capacity building — the DBN Entrepreneurship Training Program

The Development Bank of Nigeria runs a training program, aimed at giving businesses the skills required to be successful. The training program educates MSMEs on writing business plans, basic business management and bookkeeping — among other things. By participating in such training programs, the DBN hopes businesses become more creditworthy.

To be eligible for DBN financing, the PFI must have:

  • A duly issued and valid license from CBN to conduct business like a bank or finance company.
  • Two years of profitable lending operations in the three most recent financial years, with effective risk management procedures, controls, and acceptable levels of loan portfolio quality and performance

Eligibility Criteria  CLICK HERE

Qualifying for a Development Bank of Nigeria loan

Any business involved in productive enterprises, is eligible for a loan with the Development Bank of Nigeria.

The DBN does not fund individuals and so, if you are not already registered, your company will need to register with the Corporate Affairs Commission (CAC).

Further, you must be a customer of one of the eligible financial institutions i.e. PFIs. This means you will need to have a bank account, with one of the following institutions:

Commercial banks

  • Access Bank Plc
  • Ecobank Nigeria Bank Plc
  • FCMB Ltd
  • Fidelity Bank Plc
  • First Bank Nig Ltd
  • GTBank
  • Stanbic IBTC Bank Plc
  • Sterling Bank Plc
  • Union Bank of Nig Plc
  • Wema Bank Plc

Microfinance banks

  • AB Microfinance Bank Nigeria Ltd
  • Accion Microfinance Bank Limited
  • Addosser Microfinance Bank
  • Baobab Microfinance Bank
  • Bosak Microfinance Bank
  • Davodani Microfinance Bank
  • HASAL Microfinance Bank
  • Infinity Microfinance Bank Ltd
  • La Fayette Microfinance Bank Limited
  • LAPO Microfinance Bank Ltd
  • Mainstreet Microfinance Bank Ltd
  • NPF Microfinance Bank Plc
  • Parallex Microfinance Bank
  • Seedvest Microfinance Bank
  • Trust Microfinance Bank

if your bank is not listed above, you may consider contacting them directly to inquire. Alternatively, you can apply and open a business bank account, with one of the above financial institutions.

How to get a DBN loan from your bank

1. Visit your bank: Commercial Bank, Microfinance Bank, Development Finance Institution (DFI) and other Financial Institutions and indicate you want to apply for a DBN Loan.

2. The Bank appraises the business and loan purpose, and if its assessment is favorable, the Bank applies to DBN for funding.

3. If DBN approves the loan, DBN will disburse to the Bank for on-lending to end borrowers.

What you would need 

  • Official Government Identification
  • Evidence of Company Incorporation (CAC Certificate)
  • Debenture on assets of the company
  • Bank Guarantee

Frequently asked questions (FAQs)

How much interest does the Development Bank of Nigeria charge?

DBN loans come with flexible interest rates. These interest rates depend on the loan tenor and are linked to prevailing market rates.

How does the Development Bank of Nigeria loan differ from other business loans?

DBN loans are specifically targeted at small and medium-sized enterprises (SMEs). This ensures that SMEs have increased access to credit. Further, the DBN is able to lend money for the long term, where other commercial loans are typically short-term.

Does the Development Bank of Nigeria require collateral?

As the DBN lends via intermediary banks, each of these banks will have their own requirements as to collateral. However, yes, typically collateral is required. Acceptable collateral often includes:

  • Obligations by the Federal Government of Nigeria (FGN Bonds, FGN Eurobonds, FGN Treasury Bills etc.)
  • Obligations of state governments or agencies of the Federal Government of Nigeria
  • Other non-government debt instruments
  • Physical assets e.g. real estate
  • Third party guarantors (or collateral)

The Development Bank of Nigeria website.

What you should know

  • Development Bank of Nigeria (DBN) does not lend directly to businesses. DBN loan is channelled through PFIs. PFIs carry out the credit evaluation and supervision of the loan.
  • Depending on the nature of your business and loan purpose, you may have up to 18 months moratorium on principal repayment for working capital & investment projects, and up to 10 years to repay the loan.
  • DBN loan offers flexible interest rates that are based on tenure and referenced to market rates.
  • DBN loan is specifically targeted at small businesses to ensure that such businesses have increased access to financing. In addition, DBN loans have a longer tenure than other commercial loans, which are usually short-term.

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Disclaimer

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