A $500 million loan plan for Nigerian Micro, Small, and Medium-Sized Enterprises (MSMEs) was authorized by the World Bank yesterday.
According to a statement from the Bank, the Fostering Inclusive Finance (FINCLUDE) initiative consists of a $100 million International Development Association (IDA) credit and a $400 million International Bank for Reconstruction and Development (IBRD) loan, as reported by AFP.
The Development Bank of Nigeria (DBN) will carry out the project, while Impact Credit Guarantee Limited (ICGL), a DBN subsidiary, will provide credit guarantees.
Although they make up the majority of businesses, almost half of the GDP, and a significant portion of employment, Nigeria’s micro, small, and medium-sized enterprises (MSMEs) are the backbone of the country’s economy, yet they have long faced obstacles to formal financing.
Less than 20% of MSMEs have access to bank credit; loans are frequently expensive and short-term; and many promising businesses are excluded by collateral restrictions.
With greater rejection rates and fewer customized items, women-led businesses—which comprise a significant share of MSMEs—are disproportionately impacted.
The statement stated in part that “agribusinesses, central to food security and rural livelihoods, similarly struggle to obtain longer-tenor financing for equipment, processing, storage, and logistics.”
“FINCLUDE expands affordable, longer-term finance and tailored solutions to segments with the greatest development impact in order to address these constraints,” it added.
“FINCLUDE focuses on inclusion, opportunity, and employment. According to Mathew Verghis, the World Bank Country Director for Nigeria, “Nigeria can accelerate growth and deliver tangible benefits in communities nationwide by opening finance for viable MSMEs, particularly women-led firms and agribusinesses.”
“The project will make it simpler for worthy small enterprises to obtain the funding they want in order to expand and recruit staff. We are supporting the people who drive Nigeria’s economy, particularly women and those in agriculture, by providing stronger assistance for lenders who use inclusive finance and more equitable, longer-term loans for businesses.
The initiative would facilitate the mobilization of private investment and increase MSMEs’ access to and use of innovative, inclusive financial solutions across the country.
The operation will increase the ability of banks, including microfinance banks and non-bank financial institutions like Financial Technologies (FinTechs), to offer larger loans with more affordable repayment terms through DBN. It will also scale partial credit guarantees through ICGL, allowing lenders to extend credit to companies they might otherwise deem too risky.
With the help of targeted technical assistance, loan assessment will be modernized with an AI-enabled digital platform to improve data and speed up decision-making, improve impact measurement, and increase capacity for participating financial institutions and MSMEs.
It stated that a focus on inclusion will guarantee that women-owned enterprises and agribusinesses gain from the advancements.
“FINCLUDE will assist in raising about $1.89 billion in private capital, extend debt financing to 250,000 MSMEs, including 100,000 agribusinesses and at least 150,000 women-led enterprises, and provide up to $800 million in guarantees to encourage lending.”
According to Hadija Kamayo, Task Team Leader for FINCLUDE, “by extending the average maturity of MSME loans to about three years, it will help firms invest in equipment, factories, staff, and productivity, translating finance into jobs and growth.”
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