Nepal and Germany Agree on EUR 6 Million Loan Allocation for Rural MSMEs

In a significant development, the governments of Germany and Nepal have reached an agreement to allocate EUR 6 million through the central bank of Nepal, the Nepal Rastra Bank, to two selected partner financial institutions. These funds will be utilized by the selected partners to provide local currency loans to rural and semi-urban micro, small, and medium-sized enterprises (MSMEs) in Nepal, promoting access to finance for this segment.

Identification of Partner Financial Institutions

To identify suitable financial institution partners, the German development bank KfW contracted International Project Consultancy (IPC) to conduct due diligence on several Nepali financial institutions. As part of this process, IPC prepared a request for proposals to invite expressions of interest from potential partner financial institutions and assessed their finances and potential risks.

Assessment and Selection Process

Based on these assessments, IPC shortlisted six potential partners before conducting comprehensive on-site due diligence on each. The exercise ultimately led to recommendations being provided to KfW and the Nepal Rastra Bank regarding the selection of final partner financial institutions.

Key Points

• EUR 6 million loan allocation through the Nepal Rastra Bank
• Funds will be utilized by selected partner financial institutions to provide local currency loans to rural and semi-urban MSMEs in Nepal
• Selected partners will promote access to finance for this segment