IFC to Provide $25 Million Loan to Facilitate Green Financing in Nepal

The investment is expected to create nearly 50,000 jobs in the next five years


The International Finance Corporation (IFC), the financial arm of the World Bank Group, has announced that it will provide a loan of $25 million to NMB Bank, one of Nepal’s premier banks, to boost green financing projects and small and medium enterprises (SMEs).

According to a press statement released by the IFC, the investment is expected to help expand the SME portfolio to over $1 billion by 2025 and create nearly 50,000 jobs over the next five years. SMEs have been a key engine of growth in Nepal, contributing 20% of gross domestic product (GDP) and creating over 60% of jobs in the country, said the statement. The loan marks IFC’s first climate-focused lending to a financial institution in Nepal, incorporating the internationally recognized green loan principles.

The project will also build up NMB Bank’s capacity to identify and evaluate green lending opportunities and increase access to green financing in Nepal over the next five years.

Sunil KC, the chief executive officer, NMB Bank, said, “NMB is focused on the financing of sustainable projects in the real sector in alignment with the Government of Nepal’s growth plans. Our investments comprise a balanced mix of real sector exposures which includes hydropower, agriculture, microfinance, infrastructure, tourism, SMEs, and green projects that are key drivers of economic growth and sustainability.”

He added that the new investment from IFC would add considerable value and help the bank to increase its current portfolio and widen the scope for investment in sustainable and green projects.

Climate finance is limited in Nepal, which is expected to face a further setback due to the reduction in the flow of credit in the wake of the impacts caused by the COVID-19 pandemic.

Wendy Werner, IFC country manager for Nepal, Bangladesh, and Bhutan, said, “This investment is supporting SMEs and Nepal’s sustainable development during this economic downtown. IFC believes in the tremendous opportunity for green growth through mobilizing the private sector.”

She added that the project would help boost access to finance for small and medium-sized enterprises that have been severely affected by the pandemic.

“SMEs will contribute to Nepal’s recovery in the aftermath of the pandemic,” Werner affirmed.

Based on Nepal’s commitment to the Paris Climate Agreement, IFC estimates the country has climate-smart investment opportunities of $46 billion by 2030. Further, it also said that since 1956, IFC had invested over $150 million in Nepal’s priority sectors.

Meanwhile, for India, the IFC recently announced its plan to lend $36 million (~₹2.57 billion) for a 250 MW solar project by Mahindra Renewables Private Limited in Rajasthan.

Earlier, IFC and HSBC Global Asset Management announced raising $474 million (~₹36 billion) in the third closing of the HSBC Real Economy Green Investment Opportunity GEM Bond Fund. In June 2019, the two entities had announced the first global green bond fund aimed at real economy issuers in developing markets, to help in improving accessibility to climate finance and enhance green bond markets. The Real Economy Green Investment Opportunity GEM Bond Fund was expected to raise between $500 million to $700 million through multiple sources to promote climate centric investments in emerging economies like India and Nepal.