World Bank Turns to Small Businesses as Investment Fails to Reach Poorest Economies

 

The World Bank Group is turning to micro, small and medium-sized enterprises (MSMEs) to unlock investment and create jobs in poorer economies, after private capital mobilisation in low-income countries remained largely unchanged despite a sharp increase globally.

World Bank Group President Ajay Banga said private capital mobilised by the institution rose more than threefold, from approximately US$35 billion in fiscal year 2022 to US$112 billion in the latest fiscal year.

However, the gains have not been evenly distributed. Banga said mobilisation in low-income countries, where attracting commercial investment remains difficult, had remained flat, highlighting the challenge of directing capital to businesses and communities where financing is most limited.

“The path to the poorest and most fragile economies runs through their small businesses,” he said in an address to the World Bank Group’s Annual Meetings in Bangkok, Thailand.

He said the institution’s new MSME strategy was designed to reach businesses in economies where larger companies had yet to establish a strong presence and employment opportunities remained limited.

The strategy seeks to make small businesses more visible to lenders, connect them to larger buyers and markets, improve their ability to operate and expand access to funding.

Digital records to open access to finance

A key element of the strategy is the use of digital records to help lenders assess businesses that might otherwise struggle to obtain credit.

Many small enterprises lack conventional collateral or an established borrowing history, limiting their ability to secure financing even when they have viable operations and growth potential.

The World Bank is looking to use digital records and transaction data to improve the visibility of these businesses to financial institutions, while simplifying regulations that constrain their growth.

The approach also seeks to strengthen links between smaller enterprises and larger companies, creating opportunities for them to participate in supply chains and reach new markets.

At a separate session on MSME financing during the Annual Meetings, Banga highlighted the potential of digital payments, electronic invoicing and cash-flow information to help lenders assess businesses that are excluded from traditional financing arrangements.

He also stressed the need for supporting infrastructure, simpler regulations and partnerships that can help mobilise private investment for smaller enterprises.

Jobs pressure raises the stakes

The World Bank’s focus on small businesses comes as developing economies face mounting pressure to create employment for a rapidly expanding working-age population.

Banga said approximately 1.2 billion young people would reach working age over the next 10 to 15 years, while the job market was projected to offer only about 400 million jobs.

The resulting gap of roughly 800 million jobs underscores the need to help businesses grow, expand production and recruit more workers.

Banga said small enterprises were particularly important in fragile and conflict-affected economies, where conditions might not yet support large companies but local businesses could still provide livelihoods and contribute to economic stability.

The World Bank’s broader jobs strategy combines investment in physical and human infrastructure, predictable business regulations and measures to mobilise private capital at scale.

The institution committed US$40 billion to infrastructure and human capital in the last fiscal year, while 30 per cent of its public-sector financing supported policy and institutional reforms, according to Banga’s address.

Investment growth masks a financing challenge

Although private capital mobilisation has increased substantially, the figures presented by Banga point to a continuing challenge in getting investment into the economies that need it most.

The World Bank mobilised approximately US$112 billion in private capital in fiscal year 2026, up from US$35 billion in fiscal year 2022. Mobilisation in lower-middle-income economies rose to US$37 billion from US$14 billion, while upper-middle-income economies recorded an increase to US$50 billion from US$12 billion.

In contrast, mobilisation in low-income countries remained at approximately US$3 billion.

The figures suggest that increasing the overall volume of private investment will not, on its own, resolve the financing constraints facing smaller businesses in poorer economies.

For the World Bank, the next challenge is to make more businesses visible to lenders, reduce the barriers that discourage investment and build the financial connections that allow smaller enterprises to expand.

The success of that effort will be measured not only by the amount of capital mobilised, but also by whether businesses can secure financing, grow their operations and create the jobs needed by the next generation.