DBN unlocks N512bn credit guarantees for over 100,000 MSMEs

THE Development Bank of Nigeria (DBN) has provided partial credit guarantees worth N512 billion to support more than 100,000 micro, small and medium enterprises (MSMEs) across the country, in a move aimed at addressing the persistent financing challenges facing small businesses.

The Managing Director of DBN, Dr. Tony Okpanachi, and the Managing Director of Impact Credit Guarantee Limited (ICGL), Mr. Anthony Asonye, disclosed this during an engagement with journalists in Lagos.

The guarantee facility is designed to de-risk lending by commercial banks and microfinance institutions, enabling them to extend credit to MSMEs that may lack sufficient collateral or credit history. According to DBN, the intervention seeks to bridge Nigeria’s significant funding gap for small businesses, widely regarded as one of the major constraints to enterprise growth and job creation.

Speaking at the event, Asonye described credit guarantees as an essential tool for expanding access to finance, particularly for underserved businesses operating within the informal sector.

He noted that despite the substantial contribution of small businesses to the Nigerian economy, access to formal credit remains limited due to lenders’ perception of high risk.

He said Nigeria has about 41 million registered SMEs, which contribute between 45 and 49 percent of the nation’s Gross Domestic Product (GDP) yet account for less than one percent of total commercial bank lending.

“SMEs contribute nearly half of our GDP, yet they receive less than one percent of total banking credit,” Asonye said.

“Banks do not lend to them because many lack the capacity to secure loans, collateral remains a major challenge, and perceived risks within the operating environment push interest rates to between 35 and 40 percent.”

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To tackle the challenge, he explained that ICGL, working in partnership with the World Bank, operates a credit-collateral substitute scheme that reduces lending risks for financial institutions.

Under the arrangement, the organisation provides silent guarantees to commercial banks, covering up to 60 percent of default risk for conventional loans and up to 75 percent for businesses owned by women and young entrepreneurs.

“Our guarantee is a first-class, cash-backed collateral substitute,” Asonye said.

“Commercial banks can now deploy more assets to the SME sector with confidence, knowing there is a reliable backstop. It is a silent guarantee designed to avoid moral hazard while incentivising lending to the real drivers of the economy.”

He disclosed that the subsidiary had also helped support more than 203,000 jobs while extending thousands of guarantees to businesses in underserved communities across the country.

On his part, Okpanachi said ICGL had secured strategic partnerships with development finance institutions, including the African Development Bank and the European Investment Bank, to strengthen its operations and expand its impact.

He expressed confidence in the sustainability of the programme, projecting cumulative profit before tax of about N300 billion over the next five years.

“We are balancing developmental impact with strong financial performance to ensure DBN remains a sustainable development finance institution,” he said.