The Nigerian Online Newspaper

World Bank approves $500m credit to boost SMEs in Nigeria

The World Bank’s Board of Executive Directors has approved a US$500 million International Bank for Reconstruction and Development (IBRD) credit to increase access to finance for medium and small scale enterprises (MSMEs). These will stimulate economic growth and create jobs.
The Development Finance Project, which was approved Thursday, will provide stable funding to support the growth of Nigeria’s MSMEs through the establishment of a Development Finance Institution (DFI).
The DFI will provide term funding to eligible financial intermediaries to lend to MSMEs. The DFI would also provide partial credit risk guarantees to participating commercial banks.
The Project is in support of the Government’s efforts to promote the growth and job creation potential of private sector through improved access to financing.
Limited access to finance is a key obstacle to enterprise growth and entrepreneurship, particularly for young people, and it is a major obstacle faced by SMEs. Only 6.7% of Nigerian firms reported having a loan or active line of credit in 2014 and SME lending made up only around 5% of total commercial bank lending.
”Women entrepreneurs in Nigeria are held back by knowledge gaps, limited access to markets, and challenges  regarding land ownership rights which in turn limits their capacity to access to finance,” said Marie Francoise Marie-Nelly, World Bank Country Director for Nigeria.
“Specific attention will be paid to strengthening the capacity of business women to address these challenges.
The Project draws on experiences from other countries, such as Germany, Brazil, South Africa and Mexico, and has been developed in collaboration with other donors supporting development finance reforms in Nigeria, namely the African Development Bank (AfDB), Germany’s KFW, French Development Agency (AFD), and the United Kingdom’s Department for International Development (DFID).
The project will be implemented by the Federal Ministry of Finance (FMOF) and would be for seven years.
“The DFI will be operationally and financially sustainable and would be subject to regulation and supervision by the Central Bank of Nigeria, which will enforce requirements similar to those applied to commercial banks, including strong prudential transparency and accountability standards” said Arnaud D. Dornel, Lead Financial Sector Specialist and Task Team Leader of the Project.