White Lotus will make equity investments in Nepal's high-growth small and medium enterprises (SMEs), helping them achieve their potential and create more jobs.
Business Oxygen is Nepal's first private-equity fund. IFC has committed $7 million to this $14 million sector-agnostic fund. The fund combines risk capital financing with advisory support to help investee small and medium enterprises develop fundamental financial systems, quality-assurance standards, and corporate governance frameworks.
Chairman of White Lotus, Siddhant Raj Pandey, after signing the agreement said, "Despite the challenges posed by this year's earthquake, there is significant potential for SMEs in Nepal. White Lotus will develop a robust portfolio of investee firms that will become a strong contributor to Nepal's commercial growth."
SMEs are a vital component of Nepal's economy. They employ 1.75 million people and account for 22 per cent of the country's GDP. There are an estimated 111,442 operational SMEs, out of which 63 per cent were registered over the last decade.
Improved access to finance is essential for growth of these SMEs. Only 39 per cent of firms in the micro, small, and medium enterprise segment have adequate access to finance, compared to 78 per cent of large enterprises. Business Oxygen is designed to address this challenge.
"Business Oxygen's ability to provide risk capital to SMEs in Nepal provides a vital solution for firms too small or too new for traditional commercial bank financing," said IFC's country manager for Bangladesh, Nepal, and Bhutan Wendy Jo Werner. "The fund is unique because it provides equity and also advisory to catalyze the growth of small businesses."
Similarly, Tracy Washington, SME Ventures' programme manager, on the ocaasion, said that White Lotus will play an important role in developing the private equity sector in Nepal. "We look forward to supporting the team as it demonstrates that new funds, even in challenging markets, can achieve promising results," she added.
Business Oxygen is part of IFC's SME Ventures programme, which supports the creation of risk capital funds in fragile, frontier, and post-conflict markets. With four funds covering six countries, SME Ventures is expanding to new markets where the need for risk capital remains high and potential for growth makes private equity an effective market solution.