Mozambique: World Bank Loan for Access to Finance and Economic Opportunities

The Board of Directors of the World Bank on 31 March approved a US$300 million loan for the Mozambique Access to Finance and Economic Opportunities project. The project will last for six years (2023-2029) and is financed by the International Development Association (IDA), the branch of the World Bank Group that provides grants and low to zero-interest loans for projects and programmes in the world’s poorest countries that are intended to boost economic growth, reduce poverty, and improve poor people’s lives.

According to a World Bank press release, the project directly supports the Mozambican government’s reform initiative, the Package of Economic Acceleration Measures – PAE.

This includes the creation of a national Credit Guarantee Fund, the purpose of which, according to the release, is “to help mobilise liquidity in the banking system and unlock financing to small and medium enterprises, including women-owned firms and those operating in regions or sectors vulnerable to climatic shocks. It will also increase economic opportunities by deepening business environment reforms, expanding market access, and providing training and financing”.

The project is expected to create over 26,000 new jobs over six years. According to the World Bank, it will also “promote financial inclusion by linking members of informal savings groups with formal financial institutions to promote sound resource management and resilience to shocks, particularly for women-owned or led businesses”. “Generating enough jobs, particularly green and productive jobs”, the release continues “is a critical challenge for Mozambique. To keep pace with the country’s young and rapidly growing population, estimated to reach 50 million by 2040, the economy must create 500,000 jobs every year – 20 times the 25,000 formal jobs currently created annually”.

“The innovative approach to combining private and financial sector development interventions aims to address key constraints limiting financing for SMEs in Mozambique and mobilise private capital through the creation of a national Credit Guarantee Fund, which the Ministry of Economy and Finance will establish,” said Julian Casal, World Bank Senior Financial Sector Economist for Mozambique.

The Credit Guarantee Fund, the release adds, will open lines of credit to complement the credit guarantees from private capital and matched savings programmes.