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DBN commences sustainability standard certification to measure projects impact

Besides its Green Strategy, which the development finance uses in engaging its community through training and projects’ execution, Development Bank of Nigeria (DBN), says it has also started a sustainability standard certification initiative that will enable it to assess the impact of such interventions. The Bank’s Sustainability Specialist, Lolade Awogbade, elaborates in this interview with the Managing Editor, Sustainable Economy, Clara Nwachukwu. Excerpts:   

What is the DBN Green Strategy all about?

The way we think about our Green Strategy is more of a proposition because, on one hand, we try to identify the relevant markets and opportunities with the Participating Financial Institutions (PFIs). Also, we want to act as advocates for creating technical capacity in terms of helping the banks build their internal capacity around the area of green. One thing we realized when we were doing our green study last year, during the green market survey was that if you ask them, a lot of these banks say they are not doing green because they don’t understand a lot about how green is categorized. Immediately we knew that that was an area that we also had to help our PFIs to improve their capacity so that they could then create and structure products that would meet the different markets. A lot of them are already playing in that space, they just needed refining. The third component is being able to capture the utilities that exist, but this is more from the DBN side. 

Over the past year, we’ve been working on green products and this is something that we intend to take to the market and some of the agreements that we already have spoken in a large part to what we are trying to do with the grid. One of the areas we have made a lot of progress on is partnerships. We have signed an MoU with the Rural Electrification Agency (REA), and all are part of the grid strategy.

The idea is to develop on our side, our capability in terms of training of our people as well. The idea is also for DBN to be seen as actively creating impact. We want to see results in terms of businesses being structured in the right way to seek the financing that they need. We want to see that the PFIs also create products that can attract MSMEs in that green area. For us, green will cover a lot of things from gender, power with regards to renewable energy and that whole space is what we have defined as green – access to finance, reduction in carbon emission, and being able to create jobs directly and indirectly. 

It is important for us as well as part of our strategy to tie in the things DBN is doing and what the government is doing in terms of commitment under the Paris Agreement. We hope that all of these efforts will add to the overall country’s ambition and targets and that we will be able to say DBN is contributing to that space in one way or another. In a nutshell, that’s what we’re trying to do in terms of our green strategy.

What about your green conversations with MSMEs and how successful have they been?

DBN is a wholesale lending institution, and has three main mandates: one in terms of providing credit through the PFIs to the banks – Micro-Finance and Deposit Money Banks. Two, in technical assistance along the lines of what I’ve described in terms of upskilling and training for capacity; in our case, we have also extended that to MSMEs. Third, is being able to provide credit guarantees through our subsidiary company, Impact Credit Guarantee Ltd.

We don’t deal directly with MSMEs, because of our wholesale lending module; we only deal with the PFIs. The MSMEs, whatever area or capacity cannot come to DBN directly and say: I want you guys to give me a loan. The way it works is that MSMEs will approach their lenders – the banks, and say: I understand that you guys have DBN funding domiciled here; I will like to take advantage of that. Based on their current positioning in terms of structure and the bank’s appetite based on their assessment of the MSME; usually, an agreement is reached and a transaction occurs. DBN is not part of that conversation; we only deal with the PFIs. 

What I meant was: how compliant are the PFIs in terms of your objectives in emission reduction, better business structuring, job creation, and the rest?

DBN has been around for four+ years now, and we track all those things; there are several things that we track normally as an organization, they are called development targets that span across gender, unemployment, and people in critically identified areas. But in terms of the Green Strategy now, we are just taking it to the market. We haven’t put anything out there and we expect over the next few months, we are going to carry out some things – one, completion of the actual green products we are taking to the market. Two, we want to start a training programme. This is something as an organisation we are moving along with, hopefully by the time we get into it, everything will pick up speed. As I said, we only have the MoU that we signed with REA. We want to do even more.

What do you see as the challenges from the PFIs based on their experiences on the field?

One of the challenges that I’ve seen over time that keeps coming up from the PFIs is the readiness of the MSMEs to be able to receive the funding that exists. One of the things that DBN has seen over time is that the MSMEs based on their structure are not usually in the best position when they approach the banks and that’s why they get rejected a lot of the time. 

One thing that DBN has tried to do is to help MSMEs in that area in terms of the capacity-building programme that we put together for them. This capacity-building programme covers everything from operation to internal structuring, to accounting – teaching them how to manage their books, and teaching them how to manage their people. Increasingly, it includes sustainability options and digital technology options. These are what DBN has tried to do in terms of the challenges that MSMEs face in accessing the loans. 

We do these programmes for free; in fact, one of our flagship programmes is the DBN Entrepreneurship Programme runs annually. It is on right now and we train many MSMEs over three months, put them through several modules and courses. Moving forward, because the programme is paid for by DBN, it is not cheap. What we are working on as an organisation moving into 2022 is building a management system that will be able to take a whole lot more MSMEs and provide the same capacity-building opportunity for them that we are given to a few right now. 

People would argue that it is human nature not to appreciate things when they are free. How does this impact the entrepreneurship programme? 

The programme is one that it is not just anybody that can get in. It is quite a competitive process and there is a selection process because of limited space. The MSMEs have to apply and thanks to our partners – the Enterprise Development Centre, they set certain criteria and a few are chosen. Because of the effort and the fact that the entire application process is sort of fixed, only the serious ones would scale through. Once you’ve done that we know you can appreciate what is being offered, and a select few are taken in every year. 

Building a class from the technology factor, as a Development Finance Institution (DFI), it is one of our duties to ensure that we provide the learning opportunities and because we have seen the challenges that exist in the market, we are putting our foot forward to say: we want to help MSMEs out there. The hope is that in the future when the MSMEs approach the banks, maybe the banks will say: show us evidence that you’ve completed X, Y & Z course on the DBN platform; then they know that you know what you are talking about. This is what we are working toward; to be able to provide something for people and only the serious-minded ones will get through. Hopefully, maybe the ones that are not so serious will realise that they have to make certain areas of their business more serious to be able to get the funding that they need. You can’t force anyone to do anything; you just hope that they see the value that is being provided.

Three years down the line since you started running the entrepreneurship programme, what has been the impact on MSMEs’ attitude toward the PFIs?

We do a lot of monitoring and evaluation (M&E) at DBN, so we get feedback reports on the MSMEs, for each year we run the programme, after the programme MSMEs are partnered with some mentors and we get reports from those mentors to see how the MSMEs are doing, and that’s how we keep track. We also periodically check in as part of our overall M&E process, and the feedback that we get is the reason why over the years we continue to expand on the programme. The reports are: oh my goodness, I saw a significant shift in my business, or as soon as I was able to speak to the bank on the fact that I’ve been on the DBN MSMEs programme, the tone of the conversation changed. Whereas I couldn’t secure funding before, being a part of the programme has helped.

Also, we have situations where because of the knowledge gained during the DBN programme, MSMEs have been able to get additional funding from other sources. There was a Canadian Fund scheme that happened two years ago and one of our MSMEs, who had been on the programme managed to secure funding.

In terms of what the results are, they are quite subjective and relative, but I do think that entrepreneurs, who have been on the programme have seen a significant shift – one, in their thinking; two, in their practices; and three, in the seriousness they are now accorded by the banks.

What about in their business models?

Absolutely, business modeling is part of the modules that they are taken on during the programme itself, which brings about the difference in thinking because they are exposed to different ways of running a business. If you look at the partners that we use as well, we are using both academics and core management consultants to run the programme, so they are not some backroom organisations, it’s the Enterprise Development Centre, so you can then imagine the quality of content that they are exposed to. 

Tell me more about the MoU with REA, seeing as millions of Nigerians in the rural areas do not have access to power especially in this period of the energy transition? 

Generally, the idea is that as part of moving for true green and action in terms of the provision of power especially for the rural areas, DBN is committed and has shown its commitment by partnering with REA and a few other stakeholders to ensure we can move the project forward.  

We are still on a journey of something called, Sustainability Standard Certification Initiative (SSCI), and it’s headed by the European Union, and what this does is to cover the eight main areas of business, and across each of these business areas, you have to draw a very clear line to impact and sustainability.                                                                                                              

Regularly, the UN agencies and UNEP FI, in particular, come up with new provisions for reporting for financial institutions to ascertain if they are truly funding green investments in line with the Paris Protocol to mitigate climate change. How compliant are your PFIs to these provisions?

The truth is, a lot of banks in Nigeria are still trying to come to grips with what that means because there is no interest in it for them. The banks are not focused on what the UNEP Fi might be coming up with at the moment, but what I can say is that all banks in Nigeria are extremely compliant with the local regulation that guides sustainability, which is the Nigerian Sustainable Banking Principle (NSBP). 

There are some banks, maybe Access and Zenith have signed on to protocols like UNEP Fi, it’s not something that in this part of the world that we are all out for. I don’t think it’s such a huge problem, because if we look at the contributions of Nigeria as a whole to the overall global emission it is insignificant. We have bigger problems here; our problems, in terms of if you look across the SDGs, are poverty, education, healthcare, those are big issues that we haven’t got a grip on. My advice has always been even to the central committee is that as Nigerians we have to stay focused and create solutions for the bigger problems that we have. 

If you look at sustainability standards like NSBP, they speak more to that. Let’s stop worrying about what UNEP Fi is doing and what the world is saying especially in this latest buzzword, Net-Zero. At DBN, one thing that we are trying to do is create ready solutions as part of our sustainability strategy. One of the ways we are doing this is by focusing on the circular economy or circularity. This is because we know that if we can educate the local MSMEs on how they can: One, either grow a business or two, use waste to grow or extend the business then this will translate into a reduction in overall poverty level, creation of jobs and wealth.

When it comes to issues of sustainability, those are the kinds of conversations as professionals in this field that we need to focus on. I’m more worried about the real impact that I’m creating in my society, and DBN being able to champion women, being able to say: we are going to create partnerships like the one we have with REA or create projects like the one we are creating now by partnering with some local architectural firms on circular economy. Those are for me the more important conversations.

Let me also add that over the past years, we have also been doing a lot of work internally, when it comes to sustainability. We are still on a journey of something called, Sustainability Standard Certification Initiative (SSCI), and it’s headed by the European Union, and what this does is to cover the eight main areas of business, and across each of these business areas, you have to draw a very clear line to impact and sustainability. Whether it’s technology, whether it’s people, they have forced us to take a position, which they call a high-profit statement and a high impact goal. Everything that we do as an organisation today at DBN has been tied into these key statements.

These statements and goals have allowed us to put at the back of our mind to always think: What is the impact of the target we have set for ourselves across different areas. We’ve been doing that certification over the past year, and the hope is that before the year runs out, we would have been certified. This is something that we will be extremely proud of as being the only DFI in Nigeria to have got such a certification. So we are not just ticking the box.

Again, if you look at our Annual Report, you will see that it’s not the regular Annual Report, it’s an integrated report and we are very deliberate about that. What does integrated reporting do? It ensures that you can tell the non-financial story and development of your organisation, but you can tell it in a way that links to what you are doing on the financial platform. 

We do our reporting across six key areas; we call them our key capital covering – social, human, financial, intellectual, manufacturing … What we do is that we report our activities against each of these areas and for each of these areas, you will see that everything that we do, we tie it to impact. We always tell that impact story, whether it’s in numbers or whether it’s in actual developmental impact and movement of metrics because DBN is not just about nice stories or ticking the box, we want to ensure that we are accountable to make the necessary impact on the sustainability side of things. Over the past two years, we’ve been refining the report, and next year, the report will take a slightly different angle because we want to increasingly be true to the developmental impact mandate, which we have been given.  

Finally, in terms of demographics, do you specify for your PFIs how to go about disbursing their loans in terms of gender, age, occupation, education?

No, we have some impact developmental areas that we have called out and we measure specifically for them. They include gender, people from disadvantaged areas (highly critical or highly focused areas).

…Do they follow it strictly or do they use their discretion?

We usually get reports from them and how they go about it, nobody can tell. We always get a list – the end-borrowers list and based on this list, we then can see and categorize. Obviously, in the conversations that we have with the PFIs, we always mention that these are the key areas they should look out for, and it is important to us that lending goes to these specified areas and we get the end-borrowers list periodically.   

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