The International Bank for Reconstruction and Development (IBRD) credit will be used to stimulate economic growth in agriculture, trade, light manufacturing and services, as well as create jobs in Africa’s biggest economy.
A Development Finance Institution (DFI) will be established which will provide eligible financial intermediaries access to the funds to lend to MSMEs.
According to the World Bank, in 2011 only 9.5 per cent of Nigerian SMEs has a loan in the books or line of credit, with SME lending only making up a total of five per cent of commercial bank lending.
“Limited access to private finance is a key obstacle to enterprise growth and entrepreneurship, particularly for young people, and it is a major obstacle faced by SMEs,” said the group.
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Marie Francoise Marie-Nelly, country director for Nigeria at the World Bank, added that women entrepreneurs in particular face a number of challenges.
”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 will also be paid to cater to supporting the needs of these business women in order to address this problem.”
(READ MORE: Access to funding still a sizeable obstacle for SMEs)
The Development Finance Project is a joint effort between the World Bank, the African Development Bank, German based KFW, the French agency for development AFD and the United Kingdom’s Department for International Development.
Financing will be provided by the donors through their own individual projects, which will not require the co-mingling of funds.
The project will be implemented over a seven year period by Nigeria’s Federal Ministry of Finance.
(READ MORE: Plans in place to support Nigeria's SMEs)
“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,” added Arnaud Dornel, lead financial sector specialist and task team leader of the project.