World Bank provides $150 million to strengthen financial sector

The World Bank’s Board of executive directors today approved a $150 million ‘Finance for Growth’ development policy credit to strengthen financial sector stability, diversify financial solutions, and increase access to financial services in support of Nepal’s green, resilient, and inclusive development.

“A well-functioning financial system is a key enabler for the mobilisation of private investment and driver of economic activity,” World Bank country director for Maldives, Nepal and Sri Lanka Faris Hadad-Zervos said. “By strengthening the financial sector, this project will contribute to Nepal’s green, resilient, and inclusive recovery and growth path, particularly benefiting the poor and vulnerable.”

The second Finance for Growth operation will support enhanced supervision of the banking sector to address financial stability risks in the context of the Covid-19 pandemic’s impacts. The operation will help open up capital, insurance, and disaster risk financing markets, and foster financial product innovations, the multilateral development partner said, adding that it will also support initiatives to increase liquidity and inclusion through access to external commercial borrowing, financial digitalisation, and financial literacy for women. “This will help improve the functioning of the financial sector to support private sector-led growth.”

The operation also initiates a new climate agenda, supporting climate finance resilience policy measures across banking, insurance, and capital markets. This can pave the way for the introduction of green loan principles and incentives for green lending as well as new insurance and capital market products adapted to address both climate mitigation and adaptation challenges.

“Through this project we look forward to supporting the government’s transformative financial sector reform agenda which, among others, introduces a first round of reforms to strengthen financial sector resilience against climate-related risks,” World Bank task team leader for the project Peter Mousley said, adding that it will lay down strong foundations for a more stable, less bank-centric and more inclusive financial sector that is better positioned to mobilize private investment and support real economic activity.