Financing Small- and Medium-Sized Enterprises in Nigeria

This report focuses on constraints to SME development caused by a lack of access to finance, which is described by SMEs as the second biggest obstacle they face after the lack of a reliable supply of electricity. The study provides a comprehensive assessment of the availability of finance to SMEs in Nigeria by analyzing both the demand and supply sides of SME finance. The report further discusses a number of policy recommendations on how to reduce obstacles to SME financing and increase lending to SMEs by formal financial institutions. This report presents findings from two surveys of access to finance for SMEs in Nigeria. The first is a survey of formal SMEs (demand side survey) in which 511 of 1,154 enterprises originally surveyed in 2007 as part of the World Bank's Nigeria Investment Climate Assessment were re-interviewed to assess their access to financial services and to investigate possible effects of the Nigerian banking crisis on their access to finance. The second is a survey of commercial banks and other formal financial institutions involved in lending to SMEs (supply side survey) to better understand their involvement with SMEs and their business models for serving this segment. Linking both surveys in this report presents a comprehensive picture of access to finance for SMEs in Nigeria in the presence of an important exogenous shock, the Nigerian banking crisis. It also enables us to cross-check conclusions and perspectives from both the consumer and supplier sides of SME finance.