The International Finance Corporation (IFC) has agreed a risk-sharing facility to help expand lending to female-owned businesses and small and medium enterprises (SMEs) in Nigeria.
This US$25mn local-currency facility, signed with Union Bank, is part of the IFC’s small loan guarantee programme (SLGP), which facilitates local currency lending to small businesses in markets where lending is constrained by informality, high collateral requirements, and risk aversion. SLGP is backed by the International Development Association’s (IDA) private sector window, which is providing a first-loss guarantee, allowing IFC to scale up its support to underserved and unbanked SMEs.
The World Bank estimates that 70% of Nigerian women are considered unbanked, compared to 53.7% of Nigerian men. And although small businesses provide over 80% of Nigeria’s jobs, a recent World Bank survey found that only 15% of SMEs in the country reported having a bank loan or line of credit. It also found that more than half of women-managed firms named access to finance as a major obstacle to growth.
Under the terms of the facility, the IFC will cover as much as 50% percent of the risk of Union Bank’s loans to SMEs and women-owned businesses, especially in Nigeria’s conflict-affected Northern and Delta regions, where female entrepreneurs face particularly difficult challenges accessing finance. IFC’s investment also includes support from the Women Entrepreneurs Finance Initiative (We-Fi), in the form of performance-based incentives for increased lending.
March 4, 2020