Nigeria is to benefit from a $500 million (N80 billion) World Bank credit to increase access to finance for medium and small scale enterprises, MSME, in agriculture, trade, light-manufacturing, and services.
The Executive Board of Directors of the Bank, which gave approval for the facility on Friday, said the International Bank for Reconstruction and Development, IBRD, credit would help stimulate economic growth and create jobs.
The Development Finance Project, the Board said, would provide stable funding to support the growth of Nigeria’s MSMEs through the establishment of a Development Finance Institution, DFI.
The DFI would provide funding to eligible financial intermediaries to lend to MSMEs as well as provide partial risk guarantees to participating Commercial banks and other financial institutions.
The Bank has identified limited access to private finance as a key obstacle to small and medium enterprise growth and entrepreneurship, particularly for young people.
According to the World Bank, only 9.5 per cent of Nigerian SMEs had a loan in the books or line of credit in 2011, while SME lending composed of only 5 per cent of total commercial bank lending.
World Bank Country Director for Nigeria, Marie Francoise Marie-Nelly, said ”Women entrepreneurs in Nigeria are held back by knowledge gaps, limited access to markets, and challenges in some regions of Nigeria in regards to land ownership rights.”
She said specific attention would also be paid to cater to supporting the needs of these business women in order to address this problem.
The DF project is a joint effort between the World Bank, African Development Bank, AfDB, Agence Française de Développement, AFD, of France, KfW of Germany and the United Kingdom’s Department for International Development, DFID.
Indications are that all financing would be provided by the respective donors in parallel through their own individual projects, while complementary and coordinated would not require co-mingling of funds.
The project would be implemented by the Federal Ministry of Finance 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 (CBN), 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