International Finance Corporation, a member of the World Bank Group, is investing $56 million in Global IME Bank Limited (GIBL), to help increase access to finance for smaller businesses in Nepal, including women-owned firms, and foster climate-friendly projects.
“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,” said IFC in its statement.
“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.”
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% 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.
SMEs are considered as the backbone of the Nepali economy and generate 22% of GDP and provide employment almost two million people. Yet, access to finance remains a major constraint for 44% of SMEs with the SME finance gap estimated to be at around $3.6 billion. The situation is worse for WSMEs with 52% 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. 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 endeavor,” a statement quoted Ratna Raj Bajracharya, Chief Executive Officer of Global IME Bank as saying.
IFC will also help GIBL establish its climate and gender finance business lines while supporting the bank in developing a risk management framework, reads the statement.
“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,” the statement quoted Martin Holtmann, IFC’s Country Manager for Nepal, Bangladesh, and Bhutan as saying. “IFC’s focused allocation aims to empower more women in the country while also creating jobs and boosting climate and economic resilience.”
The statement further stated that it 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.
