Access to financial services remains one of the most acute constraints for small and medium-sized enterprises (SMEs) in West Africa. Due to their smaller size, limited experience, and undocumented performance, SMEs can be very risky to lenders—especially when they operate in fragile markets or more challenging environments.
The International Financial Corporation’s (IFC) Small Loan Guarantee Program is an innovative mechanism to boost lending to SMEs. The program provides SMEs with access to financial services as well as risk-sharing support to encourage financial institutions in host countries to expand their lending portfolio, with a particular focus on the harder-to-reach smaller SMEs. The IDA Private Sector Window provides support to the program, in the form of a pooled first-loss guarantee of up to $120 million, allowing IFC to scale up its support in underserved and fragile markets to unbanked SMEs—especially female-owned SMEs or SMEs working in priority sectors like climate or agriculture.
With the support of the program, Union Bank in Nigeria is helping Nigerian businesses grow and create jobs. Although small businesses provide over 80 percent of Nigeria’s jobs, a recent World Bank survey found that only 15 percent of SMEs in the country reported having a bank loan or line of credit. It also found that more than half of the women-managed firms surveyed named access to finance as a major obstacle to growth.
The program will allow Union Bank to offer more products and services to women-owned businesses, especially in Nigeria’s conflict-affected Northern and Delta regions, where entrepreneurs face particularly difficult challenges accessing finance, and more than half the population is excluded from the financial system.