Nigeria: 5-years of empowering MSMEs and driving sustainable growth- DBN

Our story thus far has been an extraordinary journey of empowering MSMEs and propelling sustainable development across all sectors of the Nigerian economy.

The year 2022 marked a significant milestone for the Development Bank of Nigeria as we celebrated five years of creating an impact within the Nigerian MSME ecosystem. Our experience has been nothing short of remarkable, filled with much learning and of course, resilience, amidst the diverse headwinds that have sought to inhibit the Bank’s progress in our nascent space of wholesale development finance.

The Significance of MSMEs in Nigeria’s Economy

Small businesses are known to be the springboard of development worldwide, creating economic opportunities, especially for those at the lower rung of the economic ladder. Nigeria, being an ever-entrepreneurial nation, is no exception. With over 40 million MSMEs, accounting for 96 percent of all businesses, 84 percent of employment, and approximately 50 percent of the entire GDP, MSMEs make a remarkable contribution to our nation’s development. However, we must ask ourselves:

• How can we propel these MSMEs to even greater heights?

How can we leverage their strength to facilitate growth in crucial sectors such as Agriculture, Education, Health, Manufacturing, and tackle challenges like energy poverty and struggling tourism sectors?

• How can we harness their potential to support green transitions and combat climate change?

These questions represent the compelling vision we have for Nigeria’s short- to medium-term future. They underpin our mandate and drive to continue supporting MSMEs with development financing, with the hope that our efforts will result in enviable growth and development that other parts of the world can learn from..

DBN’s Financing Support for MSMEs as of December 2022

In line with our commitment, DBN has provided financing support to our participating financial institutions to the tune of N631 billion as of December 2022. Over 313,000 MSMEs have benefited from this support, leading to the creation of more than 900,000 jobs. These numbers signify hope and prosperity for countless individuals and families across the nation. Women’s Empowerment and Gender Equality

A 2022 study by the International Labour Organization on the National Assessment of Women’s Entrepreneurship Development (WED) in Nigeria, found that women in Nigeria are highly interested in becoming entrepreneurs, but they face unique challenges to do so, such as barriers to accessing financial and business development services that are critical to formalizing and growing their businesses. Recognizing the underserved status of women within the Nigerian MSME sector, we have prioritized their support.  Women-owned MSMEs accounted for 69 percent of all businesses we financed by the end of the 2022 financial year, underscoring our dedication to gender equality and women’s empowerment. This commitment has garnered recognition, including an honorable mention at the 2022 Global SME Finance Awards as a leading financier of women entrepreneurs.

Catalyzing Growth Across Key Sectors

The success stories we share today are not just about our MSMEs, but how through support for our MSMEs, we are also catalysing growth across various sectors and changing the dynamics of development in our nation.

The Trade and Commerce sector in Nigeria, for instance, accounts for the highest number of micro-businesses and informal enterprises within the country. According to the International Monetary Fund, more than 80% of the entire population of Nigeria (which is more than 160 million Nigerians), depends on the informal economy. This means that the Trade and Commerce sector is the hope of daily survival and livelihood for most Nigerian families and entrepreneurs. DBN recognizes this critical need. As such, more than N230 billion have been channelled to support small businesses in the Trade and Commerce sector over the past 5 years leading up to December 2022.

The Manufacturing sector is another important aspect of the Nigerian economy. Over the past 3-5 years, the sector has been contributing between 12 to 17% to the national economy and is one of the highest labour-intensive sectors. DBN also understands that the manufacturing sector will also to a great extent, play a vital role in Nigeria’s industrialization journey. As a result, the Bank has supported MSME players in the Manufacturing sector with more than N69 billion in financing.

Another sector that affects the livelihood of many in the country is the Agricultural sector. According to the Food and Agriculture Organisation of the United Nations (FAO), Nigeria is at the cusp of a food crisis and millions of Nigerians will likely experience acute hunger in 2023 as climate adversely affects the production of food crops.
Indeed, supporting small businesses in the agriculture sector is crucial for improving food security in Nigeria. The Development Bank of Nigeria (DBN) recognizes the significance of agriculture in the country’s economy and has allocated substantial funding to agro-MSMEs. As of December 2022, the Bank has provided N27 billion to Agro-MSMEs. This funding has played a vital role in supporting agricultural activities, empowering farmers, and promoting agro-entrepreneurship. The financial support provided by DBN has helped agro-MSMEs to enhance their operations, invest in modern farming techniques, acquire machinery and equipment, expand their production capacity, and access new markets. .

The Development Bank of Nigeria (DBN) has extended its financing support beyond just agriculture to various other sectors, recognizing their importance in the overall development and prosperity of the Nigerian economy.

1. Hospitality and Tourism Sector: DBN has provided N13 billion in financing support to MSMEs operating in the hospitality and tourism sector. This funding has helped these businesses to expand their operations, improve infrastructure, enhance service quality, and contribute to the growth of Nigeria’s tourism industry.
2. Education Sector: DBN has allocated N12 billion in financing to support quality education in Nigeria. This funding has been instrumental in improving educational facilities, promoting skill development programs, and enhancing access to education across the country.
3. Health Sector: DBN has channeled N11.5 billion in financing support to the health sector, aiming to improve access to healthcare services and enhance the health conditions of the Nigerian populace. This funding has supported the development and expansion of healthcare facilities, the procurement of medical equipment, and the training of healthcare professionals.
4. Technology Sector: DBN recognizes the immense potential of technology and innovation in driving development and digital transformation across sectors. Therefore, it has allocated N11 billion to the technology sector, supporting businesses involved in technology and innovation initiatives. This funding aims to foster increased efficiency, productivity, and expanded market access for Nigerian businesses.

DBN’s Specialized Offerings

Furthermore, DBN, over the years has taken a customer-centric approach to product development, helping the Bank to meet the diverse needs of different segments and regions within the MSME ecosystem. From our discovery, the challenges of different MSME actors differ, and so are their needs. To address these gaps, DBN has maintained its strong commitment to innovative product development, developing specialized offerings such as the Long-Term Finance (LTF) product to support the PFIs in providing longer-tenor financing to the end-borrowers. The Bank also developed the Green Finance product to support businesses facilitating green transitions through renewable energy, sustainable agriculture, sustainable waste management, and so on. The Non-Interest Banking (NIB) product was developed to support small businesses, particularly those that are financially excluded and located in economically challenged regions. . The Gender Finance Framework developed by the Bank is another attempt to increase the share of women entrepreneurs benefiting from our financing. Over the years, these specialized solutions have enabled us to catalyse more impact on the last-mile enterprises, improve access to finance, and support the development of MSMEs across different segments and locations.

DBN’s Commitment to Sustainability and Climate Action

As a responsible and sustainability-driven institution, we also recognize that there is a need to support the fight against climate change. Climate change has far-reaching implications. Key sectors such as agriculture, energy, water resources, and infrastructure face significant disruptions. Extreme weather events and rising sea levels damage critical infrastructure, disrupt supply chains, and increase the costs of disaster response and recovery. The economic stability and sustainable development of Nigeria are also heavily dependent on addressing climate change. This is why DBN has actively embraced initiatives to promote environmentally-friendly practices and increase its support for businesses in the Green economy. We have actively been participating in global climate change forums, including COP26, COP27, and Finance in Common Summit where we demonstrate our commitment to addressing climate change and financing sustainable development. In addition, we have established Green Clubs in some secondary schools in Nigeria, to instill environmental consciousness in the younger generation. DBN is also undergoing the accreditation process to be the first Direct Access Entity (DAE) to the Green Climate Fund. Through offerings like the Interest Drawback Program, we also incentivize lending to green and environmentally-friendly businesses, contributing to a greener and more sustainable future.

Technical Assistance and Capacity Building

In addition, we recognize that strong, structured, and sound financial institutions are pivotal to the success of Nigerian MSMEs. To this end, we have diligently worked to strengthen the capacity of our PFIs to deliver on the mandate of alleviating financing constraints among Nigerian MSMEs. Through a technical assistance program implemented by the prestigious Frankfurt School of Finance and Management, we have empowered 20 PFIs by augmenting their processes and deepening their ecosystem knowledge of Nigerian MSMEs. This collaborative effort has therefore enhanced the PFIs’ ability to adequately meet the needs of MSMEs, creating a thriving ecosystem for sustainable growth.

Also worthy of note is that the Development Bank of Nigeria has forged invaluable partnerships, including collaboration with Google Nigeria, the Entrepreneurship Development Centre (EDC) of the Lagos Business School, and other esteemed organizations to deliver capacity-building programs to Nigerian MSMEs. In 2022, we took a significant step in empowering Nigerian entrepreneurs by developing a state-of-the-art Learning Management System (LMS) designed to facilitate their upskilling and continuous learning journey These efforts have culminated in the training of more than 4,000 MSMEs as of December 2022, equipping them with the necessary knowledge and skills to overcome financing challenges and drive their growth aspirations. 

Customer Satisfaction, Reputation, and Certifications

Our commitment to exceptional customer satisfaction remains unwavering. By the end of the 2022 financial year, our customer satisfaction survey revealed an outstanding rating of 90%, a testament to our dedication to meeting and surpassing the expectations of our valued clients. Furthermore, our exceptional Net Promoter Score (NPS) of 90% far exceeds the global average of 30% in B2B markets. This remarkable achievement highlights the enthusiastic support of our PFIs, who willingly advocate for DBN within their networks, based on their highly positive experiences with the Bank.. Their trust in our professionalism, customer-centric approach, and the excellence of our products and services is indeed, humbling.

DBN’s drive for excellence has also positioned us as a role model for other Development Finance Institutions (DFIs) and governments across Africa. Today, we share our knowledge and experiences to empower them to drive impactful development in their respective institutions and throughout the continent. This serves as a testament to the Bank’s unwavering dedication to driving positive change throughout the nation, reinforcing its pivotal position as a leading force in developmental finance across the continent. This recognition serves as both validation and inspiration for us, affirming that our ongoing efforts are acknowledged globally. It reinforces our belief in the need for greater dedication and calls us to fulfill our duty with even greater commitment.We have also achieved significant milestones in our credit ratings and certifications. Today, DBN proudly holds credit ratings of AAA by Augusto & Co. and GCR Ratings, which are both testaments to our financial strength and stability. Additionally, we obtained re-certifications in 2022 for different ISO standards. The ISO 22301 for Business Continuity Management Systems, ISO 27001 for Information Security Management Systems, and ISO 20000 for IT Service Management. All these are to showcase our unwavering commitment to operational excellence, security, and the continuity of our services. Furthermore, we have attained the highest rating level of the Sustainability Standards & Certification Initiative (SSCI) among DFIs in Nigeria, underscoring our dedication to sustainable development and responsible financing.

Future Outlook and Conclusion

As we celebrate these achievements, we remain resolute in our commitment to even greater heights. While acknowledging the hurdles that lie ahead, we embrace them as gateways to transformation, innovation, and a greater sphere of influence. We will continue to leverage our strengths, build viable partnerships, and explore new opportunities for impact, ensuring that the Development Bank of Nigeria remains a catalyst for sustainable development.

In conclusion, I extend my heartfelt gratitude to the Board of Directors, our esteemed shareholders, the Central Bank of Nigeria, our valued PFIs, and the entire DBN team for their unwavering support, resilience, and dedication. Together, we have achieved these significant milestones and together, we will continue to foster sustainable growth and drive the nation’s economic development trajectory to unprecedented heights.