The World Bank Group is rolling out a strategy to expand financing for micro, small and medium-sized enterprises, seeking to address a funding gap exceeding $4 trillion a year by using digital transaction data to help lenders assess businesses that lack conventional collateral.
World Bank Group President Ajay Banga said at the 2026 World Bank Group and International Monetary Fund (IMF) Annual Meetings in Bangkok that the strategy would help small businesses become more visible to lenders, connect them to markets, improve their operating environment and secure funding.
MSMEs account for 90% of firms and employ 75% of workers in developing countries, making their access to capital central to efforts to expand employment and private-sector growth, Banga said. Yet many struggle to obtain loans because they lack property to pledge as collateral, have limited credit histories and require loans that are costly for banks to originate and service.
“MSMEs in developing countries face a financing gap of over four trillion dollars a year,” Banga said.
The strategy seeks to change how lenders evaluate creditworthiness by placing greater emphasis on business cash flow and digital records rather than relying primarily on physical assets and conventional credit ratings.
Under current regulations, Banga said, banks need to hold roughly four times more capital when lending to an unrated small business than to a local AAA-rated corporation. The higher capital burden, combined with limited collateral and the cost of administering small loans, can make lending to smaller firms unattractive to traditional financial institutions.
Digital payments, electronic invoicing and access to tax and utility payment records could help address the information gap by creating transaction histories that lenders can use to evaluate repayment capacity.
“Data is actually the new collateral, and we are helping countries build it,” Banga said.
The World Bank Group has supported 20 countries in developing interoperable fast-payment infrastructure over the past three years, according to Banga. It has also supported electronic invoicing and digital access to tax and utility data in eight countries, while five countries have received support for open-finance frameworks designed to enable secure, privacy-protected data access.
The next phase of the strategy will focus on expanding these systems and enabling lenders to use the resulting information to assess small businesses more effectively.
The initiative also aims to reduce the operational costs facing MSMEs. Many cannot afford dedicated accountants or compliance teams, limiting their ability to manage regulatory requirements, reach new customers and expand into export markets. The World Bank Group plans to support digital shared-service providers and platforms that can offer professional services to many businesses at lower individual cost.
Its AgriConnect initiative is one example of the approach, linking smallholder farmers and cooperatives with buyers, financiers and shared infrastructure such as storage facilities.
Regulatory reforms form another part of the strategy. Banga said the institution had helped 35 countries cut red tape, 10 improve insolvency frameworks and seven reform procurement and competition regulations over the past three years. Such changes are intended to make it easier for entrepreneurs to register businesses, compete for public contracts and recover from commercial failure.
Fintech companies offer another route to financing. Banga said their lending to emerging markets had reached roughly $400 billion, with some providers using artificial intelligence-driven credit scoring to approve loans within 24 hours without conventional balance-sheet requirements or physical collateral.
The World Bank Group is also looking to help financial technology companies and digital platforms expand their lending capacity through equity investments and loans backed by MSME receivables. The institution has already invested in more than 100 fintech companies and aggregators, Banga said.
He said the World Bank Group would also work with governments to streamline fintech licensing and establish legal frameworks for asset-based lending and securitisation. Pooling MSME loans into investable securities could help attract institutional investors, including pension funds and asset managers, into a market they have historically been reluctant to enter.
At the earliest stage of a business, however, entrepreneurs may need equity rather than debt. Banga said the institution was creating centres where entrepreneurs could obtain equity, mentorship and early-stage support.
“You cannot borrow your way to the first business you open,” he said.
The strategy also includes efforts to persuade global standard setters to recognise cash-flow lending supported by digital data and adjust capital requirements accordingly, a change Banga acknowledged would be difficult.
The World Bank Group’s push comes as developing countries face a widening employment challenge. Over the next 10 to 15 years, 1.2 billion young people are expected to reach working age in the developing world, while those countries are projected to create only about 420 million jobs, according to Banga.
He said the institution’s approach was intended to help businesses start, expand and hire by combining infrastructure investment, improved governance and private capital mobilisation.
Last year, the World Bank Group mobilised $112 billion in private capital, more than three times the amount mobilised four years earlier, alongside $120 billion from its own balance sheet, Banga said. Private capital mobilisation increased across several income groups, and the institution mobilised two and a half times as much across Africa, he said.
The International Finance Corporation, the World Bank Group’s private-sector arm, increased commitments in International Development Association and fragile and conflict-affected countries to $12 billion and mobilised an additional $11 billion in private capital, according to Banga.
He said the existing model had not delivered enough private financing to fragile and conflict-affected economies, where MSMEs often form the core of economic activity.
The institution plans to work with local banks, microfinance institutions and digital aggregators that have established relationships with small businesses, while using pooled first-loss facilities to reduce the risks faced by private investors.
For the World Bank Group, the challenge is not only to make more credit available, but to build financial systems capable of reaching businesses that traditional lending models have left underserved.
