Mozambique: The World Bank gives Mozambique $300 million to improve its access to finance and economic opportunities

The International Development Association (*IDA) will pay for the Mozambique Access to Finance and Economic Opportunities Project (Mas Oportunidades) with a $300 million credit accepted by the World Bank Board of Directors yesterday. The project will run for six years, from 2023 to 2029.

Idah Z. Pswarayi-Riddihough, World Bank Country Director for Mozambique, Madagascar, Mauritius, Comoros, and Seychelles, said, “The World Bank will help the government of Mozambique deal with multiple economic shocks and market constraints that stop micro, small, and medium enterprises (MSMEs) and individuals, including informal workers, from accessing and using financial services and taking advantage of economic opportunities.”

The project helps the Mozambique government’s plan to speed up economic growth called Pacote de Medidas de Aceleraco Económica. (PAE). It does this by forming the first national Credit Guarantee Fund in Mozambique. This fund will help increase the money in the banking system and make it easier for small and medium-sized businesses (SMEs), especially those run by women or in areas or industries vulnerable to climate shocks, to get loans.

Mozambique has a big problem with not having enough jobs, especially green and productive ones. To keep up with the country’s young and rapidly growing population, forecast to reach 50 million by 2040; the economy must create 500,000 jobs per year, 20 times more than the current 25,000 official jobs.

The private sector, mainly made up of small, informal, and low-productivity businesses, fails to create enough jobs.

This is partly because there are structural problems with getting money, especially credit, which slows the growth and progress of businesses. Small and medium-sized enterprises, especially those owned or run by women, are vulnerable to climate and economic shocks. This is made worse because they don’t have easy access to financial goods to help them deal with these risks.

Mozambique’s Ministry of Economy and Finance will set up a national Credit Guarantee Fund, which will help attract private capital. “Julián Casal, the World Bank’s Senior Financial Sector Economist for Mozambique, said that this new way of combining personal and financial sector development interventions is meant to solve some of the main problems that make it hard for small and medium-sized businesses (MSMEs) in Mozambique to get financing.

The Credit Guarantee Fund will protect lenders from the credit risk of third parties. This facilitates giving people loans. Lines of credit will work with credit guarantees to bring in private capital, and matched savings programs will connect everyday savings to official banks and mobile wallets.

The initiative is by the Country Partnership Framework (CPF) for Mozambique (2023-2027), World Bank Group. It also aligns with the objectives of the government, which are to encourage diversified growth and productivity and improve the skills base to assist in the development of Mozambique’s human capital. Also, the project will use other World Bank and International Finance Corporation (IFC) projects and funding to help it succeed.

The International Development Association (IDA), which was started by the World Bank in 1960, helps the world’s poorest countries by giving them funds and loans with low or no interest for projects and programs that increase economic growth, reduce poverty, and make poor people’s lives better.

IDA is one of the most significant sources of assistance for the world’s 74 poorest nations, 39 of which are in Africa. The 1.3 billion people who live in IDA countries are better off because of the money they get from IDA.

Since 1960, $496 billion has been given by IDA to 114 countries. Over the last three years (FY20–FY22), the average amount of money pledged each year has been about $34.7 billion, with about 70 percent going to Africa.