completed· Education

Sustainable Economic Development in Rural and Semi-Urban Areas - MSME Finance, Phase II (AM)

The objective of the FC-module is the sustainable provision and use of a target-group oriented loan portfolio for predominantly rural and semi-urban micro, small and medium-sized enterprises (MSMEs) for their business investments (working capital and fixed capital investments). By better tailoring the financing offer to the needs of rural and semi-urban MSMEs, the FC-module contributes to the overall goal of improving the entrepreneurial ecosystem for sustainable and socially balanced economic development in Nepal. In the context of the covid-crisis, the FC-module shall further provide access to short-term bridge loans in order to support MSMEs liquidity.The indirect target group are predominantly rural and semi-urban MSMEs (incl. cooperatives and single entrepreneurs), which will benefit from improved access to a needs-based loan offer thanks to the additional refinancing and the MSME-tailored products. The direct target group are two selected banks - the commercial bank Siddhartha Bank Limited (SBL) and the development bank Muktinath Bikas Bank Limited (MNBBL) - which provide financial services to MSMEs and whose capacities and activities in the area of rural and semi-urban MSME finance will be strengthened.The total cost of the FC-module is EUR 14.5 million, of which in total EUR 7.0 million will be financed by a FC-grant: EUR 6.0 million FC-grant will be provided in form of a long-term loan for the refinancing of the MSME loan portfolio of the two partner financial institutions (PFIs) and EUR 1.0 million FC-grant will be provided for an Accompanying Measure. EUR 7.5 million will be provided as an own contribution by the PFIs to leverage the FC-funds for the refinancing line. Under the Accompanying Measure, the capacities and know-how of the PFIs (incl. crisis management) as well as of the MSMEs (particularly financial literacy) shall be strengthened. Moreover, the central bank Nepal Rastra Bank (NRB) shall be supported in the set-up and administration of a revolving fund for MSME finance.