To help increase access to finance for smaller businesses in Nepal, including women-owned firms, and foster climate-friendly projects, the International Finance Corporation (IFC) is investing $56 million in Global IME Bank Limited (GIBL), the largest commercial bank in the country.

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 said in a statement on last Friday.

According to the statement, IFC’s largest investment—as well as mobilization 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.

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.

It is noted that 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.

According to the statement, 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.

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

“Recognizing 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 endeavor,” he added.

According to the statement, 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,

“IFC’s focused allocation aims to empower more women in the country while also creating jobs and boosting climate and economic resilience,” said Martin Holtmann, IFC’s Country Manager for Nepal, Bangladesh, and Bhutan.

It is noted that this is the third partnership between IFC and GIBL.

In 2022, IFC extended a trade finance facility as part of its Global Trade Finance Program (GTFP), which included a special provision for green trade financing.

At the time, it was IFC’s first green trade finance line globally.

IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets.

The organization works in more than 100 countries, using its capital, expertise, and influence to create markets and opportunities in developing countries.

In fiscal year 2023, IFC committed a record $43.7 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of global compounding crises.

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