Nigeria has received a significant boost to its small business ecosystem following the approval of a $500 million financing package by the World Bank, aimed at widening access to affordable credit for micro, small and medium enterprises (MSMEs) across the country.
The funding, approved under the Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) project, is expected to address long-standing financing gaps that have constrained the growth of small businesses, particularly women-owned enterprises and agribusinesses that play a central role in employment and food security.
The global lender disclosed the approval in a statement issued on Saturday, confirming that the package combines a $400 million loan from the International Bank for Reconstruction and Development (IBRD) and a $100 million credit from the International Development Association (IDA) to the Federal Republic of Nigeria.
World Bank approves $500m MSME finance package for Nigeria
The World Bank said the newly approved intervention will be implemented through the Development Bank of Nigeria (DBN), while credit guarantees will be provided by its subsidiary, Impact Credit Guarantee Limited (ICGL). The structure is designed to reduce lending risks for financial institutions and encourage them to extend longer-term and more affordable loans to MSMEs that are typically excluded from formal credit markets.
Despite accounting for the vast majority of businesses in Nigeria and contributing nearly half of the country’s gross domestic product, MSMEs continue to face serious financing constraints.
According to the World Bank, fewer than five per cent of Nigerian MSMEs have access to bank credit, with most relying on informal financing channels that are often unstable and expensive.
Where bank loans are available, they are frequently short-term, carry high interest rates, and are tied to stringent collateral requirements that many small businesses cannot meet. These challenges have limited the ability of MSMEs to invest in machinery, expand production, adopt new technologies, or hire additional workers.
The World Bank noted that women-led businesses face even greater barriers, recording higher loan rejection rates and limited access to financial products tailored to their needs. Agribusinesses, which are critical to rural livelihoods and national food supply, also struggle to secure longer-tenor financing for equipment, processing facilities, storage, and logistics.
Through FINCLUDE, the World Bank aims to directly tackle these structural weaknesses by expanding access to inclusive, longer-term financing solutions for MSMEs with the highest development impact.
Commenting on the approval, the World Bank’s Country Director for Nigeria, Mathew Verghis, said the initiative aligns with the institution’s focus on job creation, opportunity, and inclusive economic growth.
According to him, improving access to finance for viable MSMEs—especially women-owned enterprises and agribusinesses—has the potential to accelerate Nigeria’s economic recovery and deliver tangible benefits at the community level.
He explained that by supporting lenders that practise inclusive finance and encouraging fairer loan terms, the project would strengthen the backbone of Nigeria’s economy and help small businesses scale sustainably.
Under the programme, participating financial institutions—including commercial banks, microfinance banks, and non-bank lenders such as financial technology firms—will receive support to expand their MSME lending portfolios. The project will also help lenders offer larger loans with longer repayment periods, reducing the pressure on small businesses that often struggle with short loan maturities.
In addition, Impact Credit Guarantee Limited will scale up partial credit guarantees, enabling lenders to extend financing to businesses that would ordinarily be classified as high-risk. This risk-sharing mechanism is expected to unlock new lending opportunities and attract private capital into the MSME space.
Beyond financing, FINCLUDE includes a strong technical assistance component. The World Bank said targeted support would be provided to modernise loan appraisal processes using digital and AI-enabled platforms. These tools are expected to speed up credit decisions, improve data usage, strengthen impact measurement, and enhance risk assessment for lenders.
Capacity-building support will also be extended to MSMEs to improve financial literacy, record-keeping, and business planning—key areas that often limit their ability to access formal credit.
The Task Team Leader for the project, Hadija Kamayo, disclosed that FINCLUDE is expected to mobilise approximately $1.89 billion in private capital over its implementation period. She added that the programme aims to expand debt financing to 250,000 MSMEs, including at least 150,000 women-led businesses and 100,000 agribusinesses.
Kamayo further explained that the project would issue up to $800 million in credit guarantees to catalyse lending and extend the average maturity of MSME loans to about three years. This, she said, would give businesses the breathing space needed to invest in equipment, factories, staff, and productivity-enhancing technologies.
By translating improved access to finance into real economic activity, the World Bank believes the project will support job creation, boost household incomes, and strengthen Nigeria’s private sector-led growth.
The approval adds to Nigeria’s expanding portfolio of World Bank-supported development programmes. As of June 30, 2025, Nigeria’s external debt stood at $46.98 billion, according to data from the Debt Management Office.
The World Bank Group remains the country’s largest single creditor, accounting for $19.39 billion, or more than 41 per cent of Nigeria’s external debt stock. This includes $18.04 billion from the IDA and $1.35 billion from the IBRD.
While concerns persist about rising public debt, the World Bank maintains that targeted investments such as FINCLUDE are critical to unlocking private-sector growth, strengthening economic resilience, and reducing poverty through inclusive access to finance.
With MSMEs employing millions of Nigerians and serving as the engine of grassroots economic activity, the success of the FINCLUDE project could play a decisive role in shaping the country’s growth trajectory in the coming years.
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