Tuesday, June 30, 2020

IFC’s $25 million support to NMB Bank to boost green financing and access to credit

The International Finance Corporation (IFC) – a member of the World Bank Group – is providing a $25 million loan to NMB Bank to boost financing for green projects and small and medium enterprises (SMEs).
The investment is expected to help expand NMB’s SME portfolio to over $1 billion by 2025, creating up to 50,000 jobs over the next five years, according to a press note issued by IFC. SMEs have been a key engine of growth in Nepal, contributing 20 per cent of GDP and creating over 60 per cent of jobs in the country. The project is expected to see a doubling in the amount of loans available for SMEs from NMB, creating more jobs in the economy.
The loan marks IFC’s first climate focused lending to a financial institution in Nepal, incorporating the internationally recognised green loan principles. Overall the support for green financing, excluding hydro financing, is expected to contribute towards reducing CO2 emissions in the country. IFC expects the project will also build up NMB’s capacity to identify and evaluate green lending opportunities and increase access to green financing in Nepal over the next five years – trebling the amount of loans available for ‘going green’.
“NMB is focused on financing of sustainable projects in the real sector in alignment with the Government of Nepal's growth plans,” NMB Bank chief executive officer Sunil KC said, adding that the bank’s investments comprise of a balanced mix of real sector exposures which includes hydro power, agriculture, microfinance, infrastructure, tourism, SMEs and green projects that are key drivers of economic growth and sustainability. “In the current Covid -19 scenario, the new investment from IFC adds considerable value in helping us significantly increase our current portfolio and widen the scope for investment in sustainable and green projects.”
Additionally, access to 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 of the Covid-19 pandemic.
“This investment is supporting SMEs and Nepal’s sustainable development during this economic downtown,” IFC country manager for Nepal, Bangladesh and Bhutan Wendy Werner said, adding that IFC believes in the tremendous opportunity for green growth through mobilising the private sector. “The project will help boost access to finance for small and medium sized enterprises, which have been highly affected by the impacts of the pandemic.”
SMEs will contribute to Nepal’s recovery in the aftermath of the pandemic.
Based on the government commitment to the Paris Climate Agreement, IFC estimates the country’s has climate-smart investment opportunities of $46 billion by 2030. IFC’s own Climate Implementation Plan of April 2016 has an overall target of scaling up climate investments to reach 28 per cent of IFC’s annual financing and catalysing $13 billion in private sector capital annually by 2020. “IFC has invested in NMB since 2015 through a Global Trade Finance Programme (GTFP) facility and in 2018, IFC extended a working capital solution (WCS) loan.”
Since 1956, IFC has invested over $150 million in Nepal in the country’s priority sectors. By the end of June 2020, IFC’s committed portfolio in Nepal is expected to be approximately $500 million – a significant increase from previous year – where it stood at $75 million.

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