SIFEM bets on FMO-backed NMB Bank in maiden Nepal deal

 SIFEM bets on FMO-backed NMB Bank in maiden Nepal deal

The Swiss Investment Fund for Emerging Markets (SIFEM) said Thursday it has made its first investment in Nepal with a debt transaction worth $12 million for NMB Bank Ltd.

The transaction is supported by a guarantee provided to SIFEM by the Swiss Agency for Development and Cooperation (SDC). SDC has provided a first-loss guarantee of up to 30% of the amount lent to the bank, mainly to cover macroeconomic risks.

NMB Bank, headquartered in Kathmandu, is one of the leading commercial banks in Nepal. The bank operates in all provinces of Nepal through 163 branches. It serves around 30,000 borrowers and one million depositors.

This is not the first time NMB Bank has attracted a European development finance institution. The bank is already backed by Dutch development financier FMO.

FMO had first invested in Clean Energy Development Bank (CEDB) in 2008. In October 2015, CEDB and three smaller lenders—Bhrikutee Development Bank, Pathibara Bikas Bank, and Prudential Finance Company Ltd—merged into NMB via a share swap. After the merger, FMO’s stake diluted from 14% in CEDB to 3.19% in the combined entity.

However, FMO increased its stake in NMB to 20% to meet the minimum requirement for all new foreign shareholders into Nepalese commercial banks. This later diluted to around 14%. About half of this stake has been funded by Triodos Renewable Energy for Development Fund, a fund managed by Triodos Investment Management.

SIFEM’s loan to NMB Bank will give the bank flexibility to provide long-term financing to micro, small and medium-sized enterprises.

As an impact investor, SIFEM provides financial support to SMEs. At the end of 2020, it had made commitments totalling $1.147 billion. SIFEM has invested directly and indirectly in over 500 companies across more than 70 countries.

Vivek Sinha

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