New FINCLUDE Project Aims to Mobilize Private Capital and Expand Access to Credit for MSMEs Across Nigeria
The World Bank is poised to approve a $500 million loan to Nigeria today ( Friday ), marking a significant step toward expanding financial access for the country’s micro, small, and medium enterprises (MSMEs).
Dubbed the Fostering Inclusive Finance for MSMEs in Nigeria (FINCLUDE) Project, the initiative is designed to attract private investment and introduce innovative financial solutions for small businesses. Negotiations on the loan are ongoing, with approval by the World Bank Group’s board expected on December 19, 2025. The bank’s contribution will cover part of the estimated $2.39 billion total project cost.
Of the $500 million World Bank funding, $400 million will come from the International Bank for Reconstruction and Development (IBRD), while $100 million will be provided by the International Development Association (IDA). The Federal Government will act as the borrower, and the Development Bank of Nigeria (DBN) will oversee implementation and management of the funds. The remaining $1.89 billion is expected to come from commercial lenders in the form of unguaranteed financing.
The project will leverage the DBN and its subsidiary, Impact Credit Guarantee Limited, to improve access to credit for MSMEs. According to the World Bank, these institutions will act as “catalysts,” deploying a range of inclusive and innovative financial tools tailored to the diverse needs of Nigeria’s small businesses.
“DBN has a strong track record of executing complex, innovative projects and is a trusted partner of the World Bank,” the bank noted. “Its role will be central to the success of this initiative.”
The FINCLUDE project is structured around three key components:
- Inclusive Finance Products: Providing Tier 2 subordinated capital to eligible financial institutions and establishing an MSME investment fund for equity and long-term debt financing. This aims to crowd-in private capital, promote market innovations, and enhance financial sustainability.
- De-risking and Mobilization of Private Capital: Using partial credit guarantees to encourage commercial lenders to extend credit to MSMEs.
- Technical Assistance: Supporting the modernization and digitization of Nigeria’s MSME finance ecosystem, strengthening financial institutions, and improving regulatory oversight.
The World Bank highlighted Nigeria’s ongoing economic reforms as a backdrop for the project. The removal of fuel and foreign exchange subsidies, along with a unified exchange rate policy, has started to stabilize the economy, restore investor confidence, and ease inflation to 18% as of September 2025. The International Monetary Fund forecasts 3.9% real GDP growth for 2025.
Despite these gains, access to finance remains uneven, particularly for women, MSMEs, and the agricultural sector. Agriculture received just over 5% of total bank credit in 2024, while high interest rates and limited credit penetration continue to constrain smaller enterprises.
If approved, FINCLUDE will add to Nigeria’s growing portfolio of World Bank-supported programs. As of June 30, 2025, the country’s external debt stood at $46.98 billion, with the World Bank accounting for $19.39 billion, or 41.3% of the total. This makes Nigeria the largest IDA borrower in Africa and the third-largest in the world, with IDA loans alone rising from $17.1 billion in September 2024 to $18.5 billion in September 2025.
Economists emphasize that while concessional loans are beneficial due to their low interest rates and long repayment terms, their impact depends on effective deployment. Lagos-based economist Adewale Abimbola noted, “Borrowing itself is not a problem; what matters is whether the funds are directed to viable projects that can generate sustainable growth, boost revenue, and improve public services.”
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