IFC's Invests USD 55 Million in Nepal's Financial Sector

IFC's Invests USD 55 Million in Nepal's Financial Sector to Support SME Growth and Green Finance

May 16, 2023, 6:44 p.m.

IFC’s $55 million for Siddhartha Bank Limited (SBL) will support the bank in increasing access to finance for small businesses, while also fostering climate finance in Nepal.

IFC has been supporting the growth of Nepal’s financial sector for the past two decades, and this is our largest investment in any financial institution in the country.

This investment is also the first ever foreign currency syndicated loan facility in the financial sector in Nepal.

As Nepal’s economy continues to recover from the COVID-19 pandemic, small and medium enterprises (SME) need increased access to finance to create more jobs and support inclusive growth.

This funding will allow SBL to increase its on-lending to SMEs, including women-owned businesses, thereby helping support up to 15,000 jobs. Ten percent of the loan is earmarked for climate financing across several areas, including electric vehicles, climate-smart agriculture, and energy efficiency.

"IFC’s timely investment will help increase our lending to micro, small, and medium enterprises, especially in remote and rural areas, while also allowing us to expand and diversify our climate portfolio," said Sundar Prasad Kadel, CEO of SBL. "We expect it to further bolster our banking services, enabling us to offer greater value to our customers."

SMEs are the backbone of Nepal’s economy, accounting for 22 percent of the country’s gross domestic product and employing 1.8 million people. Yet access to finance remains a major constraint for 44 percent of SMEs, deterring their growth prospects and hampering job creation. The SME finance gap is estimated to be around $3.6 billion.

IFC will also support SBL's effort to identify and evaluate green lending opportunities, and provide advisory assistance designed to further strengthen the bank’s operations.

“IFC is pleased to bring more liquidity to Nepal’s financial sector in addition to our various efforts designed to meet the needs of underserved SMEs,” said Babacar S. Faye, IFC’s Country Representative in Nepal. “SBL’s commitment to expanding its green finance portfolio will also help demonstrate the viability of this segment in Nepal.”

Climate finance is crucial for Nepal, especially with the Global Climate Risk Index 2021 ranking it as one of 12 countries most affected by climate change. The country’s vulnerability to floods and landslides, along with agricultural and energy-related emissions, has long-term implications for the economy and its climate goals. Nepal has a net-zero emissions target by 2045.

IFC has so far invested over $150 million in the financial sector in Nepal since 2019, and we remain committed to supporting the country’s ongoing effort for greater financial inclusion.

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