Nepal faces a significant funding gap for MSMEs, estimated at around $3.6 billion. In recent times, Nepal’s A-class commercial banks have been securing funds from several international financial institutions to mobilise in financing MSMEs.
These efforts include partnerships and loan agreements with international financial institutions such as the International Finance Corporation (IFC), OPEC Fund, and bilateral agencies such as the United States International Development Finance Corporation (DFC).
By tapping into these international resources, Nepalese banks aim to provide much-needed capital to MSMEs, enabling them to expand operations, innovate, and contribute to job creation and economic resilience.
Here are a few examples:
1. IFC invests $56 million in Global IME
Last February, Global IME Bank signed a $56 million debt agreement with IFC, the World Bank Group’s private sector arm, to help increase access to finance for small and medium enterprises (SMEs) in Nepal, including women-owned firms, and foster climate-friendly projects. One of the goals of the financing is to boost SMEs’ competitiveness in the finance market.
The funding is expected to support the SME segment, helping businesses recover from the impacts of the COVID-19 pandemic, especially women-owned SMEs (WSMEs) and those in rural areas. The funding will also be mobilised in Nepal’s climate mitigation efforts used as climate finance in a variety of sectors, including clean transportation, climate-smart agriculture, and solar projects.
Half of the money from the investment will be split equally between climate and gender financing for the bank’s SME and retail clients. The other half will be used exclusively to lend to SMEs in Nepal.
2. OPEC Fund provides a $25 million loan to Global IME
On June 25, 2024, the OPEC Fund for International Development (the OPEC Fund) — a development finance institution — signed a US$25 million loan agreement with Nepal’s Global IME Bank to finance Nepal-based MSMEs including women-owned enterprises and climate-smart projects.
The loan will also be used in financing projects like solar energy, climate-smart agriculture, and clean transportation.
3. IFC and Siddhartha Bank sign a $55 million debt agreement
On May 17, 2023, IFC announced a significant investment of $55 million in Siddhartha Bank for financing Nepal’s SMEs, particularly women-owned and underserved rural enterprises. This investment is also the first foreign currency syndicated loan lending facility in the Banking Sector of Nepal.
According to IFC, 10% of the loan is earmarked for climate funding in a variety of areas, including electric vehicles, climate-smart agriculture, and energy efficiency. The IFC will also assist the bank in identifying and evaluating green financing possibilities, as well as providing consulting services to help the bank improve its operational conditions.
4. IFC provides $45 million to Sanima and NMB banks
In August 2022, IFC announced a $45 million investment in Nepal’s small enterprises and individuals to improve their access to credit. IFC provided a $20 million loan to Sanima Bank and $25 million to NMB Bank Limited.
This investment was a part of the IFC’s larger plan for SMEs in Nepal aiming to reach over 30,000 SMEs by 2023.
5. DFC provides NMB Bank with a loan of $100 million
In October 2022, DFC provided NMB with a $100 million direct loan to finance Nepal’s MSMEs. The partnership also focused on generating employment and livelihood opportunities for women.
According to NMB Bank, it had already on-boarded nine development finance institutions (DFIs), including DFC, for a total borrowing size of $301.50 million directed towards hydropower, renewable energy, agriculture, and SMEs.
6. DFC provides $45 million to Laxmi Bank
In December 2022, DFC made a further investment for Nepal’s MSMEs providing a direct loan of $45 million to Laxmi Bank. The partnership aimed to provide capital through lending to MSMEs engaged in agribusiness in Nepal.
