International Finance Corporation, a member of the World Bank Group, is investing $56 million in Global IME Bank Limited. The stated 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, the bank said in a statement. 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.

Fifty percent of the loan proceeds will be earmarked equally between climate and gender financing for the bank’s SME and retail clients. The remaining 50 percent 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 percent of GDP and employ almost two million people. Yet access to finance remains a major constraint for 44 percent of SMEs with the SME finance gap estimated to be around $3.6 billion. The situation is worse for WSMEs with 52 percent 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.

Neelam Dhungana Timsina, officiating governor of Nepal Rastra Bank, said that NRB was more than delighted to welcome foreign investment in Nepal, according to the statement. Dhungana hailed foreign capital as the catalyst for development of Nepal and said tat the central bank was ready to provide necessary support.

"We are delighted to receive continuous strategic support from the IFC, which is not only giving us strength and confidence but is also a mileage to stand tall among peer institutions and internationally," the statement quoted Global IME Bank chairman Chandra Prasad Dhakal as saying.

“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. 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,” said Ratna Raj Bajracharya, Chief Executive Officer of Global IME Bank.

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, catalysing 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."