World Bank Approves $500m MSME Finance Package for Nigeria

The World Bank has approved a $500 million financing package to support micro, small and medium-sized enterprises (MSMEs) in Nigeria, aimed at tackling long-standing financing challenges in the sector. The programme, known as the Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) project, is designed to expand access to affordable credit, foster innovation, and promote economic inclusion across the country.

The package comprises a $400 million loan from the International Bank for Reconstruction and Development (IBRD) and a $100 million credit from the International Development Association (IDA). The funds will be channelled through the Development Bank of Nigeria (DBN), with credit guarantees provided by DBN’s subsidiary, Impact Credit Guarantee Limited (ICGL), to reduce lending risk and encourage financial institutions to provide loans to MSMEs.

MSMEs contribute significantly to Nigeria’s economy, accounting for nearly half of the country’s GDP and providing a large share of employment. However, fewer than one in 20 MSMEs have access to formal bank credit, and those that do often face high interest rates, short loan tenors, and stringent collateral requirements. The FINCLUDE project aims to address these constraints by offering longer-term, affordable financing, particularly for women-led businesses and agribusinesses, which have historically faced disproportionate barriers.

The World Bank emphasised that the programme will not only provide capital but also improve the capacity of banks, microfinance institutions, non-bank lenders, and fintech companies to lend to MSMEs. Through partial credit guarantees and technical assistance, the project seeks to foster inclusive lending practices and mobilise private sector investment into the MSME segment.

Additionally, the initiative will incorporate digital platforms and data analytics to modernise credit appraisal processes, strengthen impact measurement, and build institutional capacity for both lenders and borrowers. By leveraging technology, the programme intends to make lending more efficient, transparent, and accessible.

The project is expected to mobilise approximately $1.89 billion in private capital and reach about 250,000 MSMEs, including 150,000 women-led businesses and 100,000 agribusinesses. Credit guarantees of up to $800 million will be issued to de-risk lending and encourage participation by financial institutions.

A key feature of the programme is the extension of loan tenors to around three years, allowing MSMEs to invest in essential infrastructure, equipment, and workforce development. This longer-term financing is designed to help businesses move from subsistence operations to scalable enterprises, driving growth and employment.

Stakeholders have welcomed the initiative as a major step toward closing the financing gap for MSMEs. The programme is seen as critical for stimulating entrepreneurial activity, supporting economic resilience, and promoting inclusive growth.

The Nigerian government views the financing package as complementary to ongoing reforms aimed at deepening financial inclusion and formalising the informal economy. Close collaboration with the World Bank and local financial institutions is expected to create a more enabling environment for small businesses, enabling them to contribute more effectively to national development goals.

Observers have stressed the importance of transparent implementation, monitoring, and evaluation to ensure that the financing reaches the intended beneficiaries and achieves measurable impact. Strong governance, clear reporting, and continuous engagement with MSMEs will be essential for the programme’s success.

Overall, the World Bank’s $500 million MSME finance package represents a significant commitment to Nigeria’s entrepreneurial sector. By expanding access to credit, fostering innovation, and supporting inclusive economic growth, the FINCLUDE project has the potential to transform the financing landscape for small and medium enterprises across the country.