Kathmandu, Feb. 4: To help increase access to finance for smaller businesses in Nepal, including women-owned firms, and foster climate-friendly projects, IFC is investing US$56 million in Global IME Bank Limited (GIBL). 

The aim is to boost competitiveness in the small and medium enterprise (SME) finance market while also improving financial inclusion, creating jobs, and supporting the nation’s climate goals.

IFC’s largest investment—as well as mobilisation in Nepal’s financial sector, will allow GIBL 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, according to a press statement of the bank. 

IFC’s funding will also contribute to climate mitigation efforts in Nepal by increasing access to climate finance across several areas, including clean transportation, climate-smart agriculture, and solar projects. 

About 50 per cent of the loan proceeds will be earmarked equally between climate and gender financing for the bank’s SME and retail clients, read the press statement. 

The remaining 50 per cent will be exclusively used for on-lending to SMEs in the country.

This is the first time any development financial institution is providing gender financing to a bank in Nepal. The backbone of Nepal’s economy, SMEs generate 22 per cent of GDP and employ almost two million people. 

Yet access to finance remains a major constraint for 44 per cent of SMEs with the SME finance gap estimated to be around US$ 3.6 billion. 

The situation is worse for WSMEs with 52 per cent of them having limited access to finance. 

Additionally, ranked as the 10th most affected country by climate change by the Global Climate Risk Index (2021), climate finance is vital for Nepal’s net-zero emissions target by 2045. 

Dr. Neelam Dhungana Timsina, Officiating Governor of Nepal Rastra Bank, said that NRB was more than delighted to welcome foreign investment in Nepal. She said that foreign capital is the catalyst for development of Nepal and NRB is ready to extend necessary support in this regard. 

Chairman of Global IME Bank Limited Chandra Prasad Dhakal said, “We are delighted to receive continuous strategic support from IFC which is not only giving us strength and confidence but also a mileage to stand tall among peer institutions as well as internationally.” 

“As the world is increasingly becoming conscious of the impact of business on climate and environment, this loan agreement reinforces our commitment to sustainability through climate and gender financing. Recognising Nepal’s potential in the development of green energy, our commitment extends to bridging the resource gap in the energy sector,” said Ratna Raj Bajracharya, Chief Executive Officer of Global IME Bank. 

“Furthermore, our initiative aims to confront gender disparity by providing financial support to economically empower women in rural Nepal. We are grateful to partner with IFC in this endeavour,” he said. IFC will also help GIBL establish its climate and gender finance business lines while supporting the bank in developing a risk management framework.

“One of IFC’s strategic priorities in Nepal is to support financial inclusion and financial sector stability. Accordingly, this investment aims to strengthen the nascent gender and climate finance markets, catalyzing more private sector funding for climate-smart assets and WSMEs,” said Martin Holtmann, IFC’s Country Manager for Nepal, Bangladesh, and Bhutan. 

“IFC’s focused allocation aims to empower more women in the country while also creating jobs and boosting climate and economic resilience.”

Babacar S. Faye, Resident Representative, IFC Nepal, said that the IFC’s investment would help Nepali SMEs to get financing support. This is the third partnership between IFC and GIBL. 

In 2022, IFC extended a trade finance facility as part of its Global Trade Finance Programme (GTFP), which included a special provision for green trade financing. At the time, it was IFC’s first green trade finance line globally.