International Finance Corporation (IFC) has injected equity capital in Rural Microfinance Development Center (RMDC) to support microfinance in Nepal.
IFC — a member of World Bank Group — has invested in 300,000 unit shares of soon to be public RMDC at premium price of Rs 180 per unit share.
It has invested Rs 54 million ($700,000) as equity capital in the wholesale lending agency to expand the micro credit service in the country. Along with the financing, IFC will also be providing assistance in developing a robust business model to RMDC.
"The project is supposed to aid in poverty reduction, women empowerment and propel economic development," pointed out IFC's country manager for Bangladesh, Bhutan and Nepal Kyle Kelhofer, while signing the agreement with RMDC.
Kelhofer and chairman of RMDC Ashoke Rana signed an agreement today on behalf of their respective institutions here today to join hands in fighting against poverty through microfinance.
IFC as a development institutions focuses on private sector development for the sustainable growth of the developing countries.
At present, the existing micro finance institutions are catering to estimated 1.7 million households by providing hassle free micro loans sans collaterals. There are 100 microfinance institutions affiliated to RMDC that comprise 76 per cent of the total micro credit market of Nepal.
"IFC's support will not only strengthen RMDC's ability to offer finance to microfinance institutions but also give out a positive message regarding the financial sector," expressed RMDC CEO Shankar Man Singh. "The coordination between these two agencies — IFC and RMDC — will also boost the entrepreneurship and self-reliance among the low income groups.
"The wholesale lender to microfinance institutions -rural development banks, microfinance development banks, rural cooperatives and financial NGOs -RMDC is planning to increase its paid up capital to Rs 520 million through Initial Public Offering (IPO) and from adding new promoters.
Six more non-promoters banks are also going to add more capital in RMDC by purchasing 140,000 unit shares at premium price. The rest 1.5 million unit shares of the proposed expansion will be issued through IPO in the near future.
IFC is the first agency to step in and inject equity capital according to RMDC's plan to expand its capital base. RMDC's current paid up capital stand at Rs 320 million belonging to 13 commercial banks, Nepal Rastra Bank (NRB), five Grameen Bikas Banks, Nirdhan Utthan Bank and Deposit and Credit Guarantee Corporation (DCGC).