Single digit interest rates not feasible now, says Diamond Bank

By Odunewu Segun

Head, Emerging Business of Diamond Bank. Ayo Olojede, says single-digit on lending will not be feasible unless banks want to indulge in charity.

Speaking specifically on the partnership by the Development Bank of Nigeria (DBN), with five commercial banks for the disbursement of loans to small and medium enterprises (SMEs), Olojede, said unless financial regulators make funds available, it would remained a mirage.

Notwithstanding the prevailing rates, Olojede said Diamond Bank, one of the five banks involved in the lending scheme, has challenged DBN on the high loan pricing, given the amount of enquiry from customers on the interest rate.

She however added: “we are at a stage in our negotiation where I am still able to considerably reduce my interest rate because they (DBN) have also buckled to allow me some leg run. So we are also putting the pressure on them to really come down to fulfil that mandate of developing the SME market through pricing, and not just on tenure.”

She recalled that when the Central Bank of Nigeria (CBN) floated a similar facility for the manufacturing and service sectors, loans were extended on a single digit rate. “They prioritised high growth sectors like manufacturing, service sectors and their likes, and the momentum was quite encouraging. So where we have these opportunities we would continue to take advantage, and optimise that relationship to support that sector. But it would depend on the supply of what I have and at what cost and how much of it can I consider to be some cost.”

While negotiations with DBN are ongoing to cut down rates, Olojede revealed that Diamond Bank had extended close to N20bn in loans to about 500 MSME customers, in addition to its enterprise development programme, Building Entrepreneurs Today (BET), through which it successfully trained 350 SMEs.

“We have been able to provide grants of over N100million for entrepreneurs to be able to progress their aspirations to be able to grow their businesses,” added.

Furthermore, she said the bank has had over four seminars this year, where it train about 16,000 customers on various topical issues that impact their businesses.

“I don’t know if you are aware that just two weeks ago, we introduced the Diamond Bank SME Zone, the first of its kind in the industry. A type of platform where customers can have access to the type of information that would enable them to run their business, information that would enable them to expand their sales with our technology offering finance issues, and there are videos with experts who address these issues.”

On loan pricing, the Managing Director, DBN, Tony Okpanachi, said: “Our pricing model is benchmarked to macro-economic rates.” He added that rates could become lower in the near future if “inflation rates fall.”

The Development Bank is expected to contribute to mobilising significant long-term financing to small businesses that are largely underserved, yet with high development potential.